10 billion euros is just the beginning: the European Union in an energy crisis

Oil and liquefied natural gas prices have jumped 60-70% since the start of the conflict, according to European Union data. In fact, according to the calculations of the European Commission, the EU countries have spent 24 billion euros more than expected on energy since the outbreak of the war. “587 million euros more per day, without receiving one more molecule of energy,” as written in the Commission’s announcement.

In Germany, the largest economy in the European Union, the government announced in recent days the temporary cancellation of taxes on gasoline and diesel worth close to 2 billion euros. At the same time, it prohibits gas stations from updating prices regularly, and they are limited to once a day. The government also announced that it will not tax cost-of-living grants that employers choose to give to employees worth up to 1,000 euros – in an attempt to encourage them to do so and help the disposable income of households.

Considering “emergency import” from the USA

In fact, according to pan-European data, 22 of the 27 member states of the European Union have already announced fiscal measures to mitigate the effects of the current energy crisis, worth a total of about 10 billion euros, and the amount is not final at all. Spain, for example, temporarily froze the VAT on fuel, at a cost of 3.5 billion euros. Slovakia announced a maximum price for residents. These measures are apparently temporary, but it will be difficult for governments to withdraw from them until the crisis ends and free movement resumes, which is not in sight. Another option that is being considered by some governments on the continent is to transfer funds directly to households to compensate them for the erosion due to energy prices the leapers

The European Union as an organization is expected next week to make it easier for member states to carry out such fiscal measures, by allowing green taxes to be suspended and possibly even increasing the deficit framework temporarily to finance the moves. Even now, the national debt rates and deficits of most European countries exceed those of the Maastricht Treaty to which the 27 member states of the Union are committed, after the Corona crisis and the war in Ukraine. Another area where the Union can help is to suspend the legal prohibitions on aid to certain sectors, such as heavy industry, in the name of preventing uncompetitive advantages for the continent’s largest economies.

An energy front in which the European Union is particularly sensitive is that of air transport. About 57% of the world traffic in this fuel passes through the Straits of Hormuz, and a similar proportion of the European consumption. The EU Transport Commissioner announced this week that the EU is considering “emergency imports” from the US. Last week, the head of the World Energy Organization, Patty Birol, warned that “the EU may only have a six-week supply of jet fuel”. In Italy, airports warned that they may have to ration jet fuel, and the German airline Lufthansa announced the cancellation of 20,000 flights this summer due to the expected shortage. The EU is considering using emergency reserves of jet fuel and announced a “continental mapping” in order to share them.