The European Commission is calling for limits on state aid due to rising energy prices
European Union officials are urging member states’ governments to refrain from providing excessive state support to offset the sharp rise in energy prices, warning that the shock caused by the war in Iran could escalate into a financial crisis.
This was reported to the Financial Times by informed sources.
According to informed sources, the European Commission insists that proposed energy subsidies, tax cuts, and price caps be limited in duration and scope.
“This is a joint effort by the European Commission. What happens in one sector of the economy can spread to the rest of society,” said European Commissioner for Energy Dan Jørgensen.
Several countries, including Italy, Poland, and Spain, have already cut fuel taxes, while others are calling for a relaxation of EU rules on state aid. Rome is also pushing for a loosening of fiscal constraints to give capitals greater freedom of action.
According to Jørgensen, the European Commission has provided “technical advice and assistance to countries in shaping the policy instruments they wish to use within the existing fiscal space.”
“U.S. strikes on Iran have led to a roughly 60 percent increase in European oil and gas prices and heightened fears of shortages of diesel and aviation fuel. This conflict, unfortunately, carries a huge risk of leading to higher inflation with all its negative consequences,” the commissioner acknowledged.
Informed sources added that the European Commission has called for “coordination and caution” regarding any measures aimed at easing energy price pressures.
They also express concern that the conflict could trigger a third economic crisis for the EU in six years, following the COVID-19 pandemic and Russia’s full-scale invasion of Ukraine in 2022.
“The problem with such a crisis is that sometimes we have to support and subsidize things we wouldn’t normally even consider, but it needs to be done in the short term. Otherwise, people will freeze or production will grind to a halt,” added the European Commissioner for Energy.
As a reminder, the European Union is preparing for an energy crisis due to the war in the Middle East. Authorities are considering fuel rationing and the use of emergency oil reserves. Energy prices are expected to remain high for a long time.
