Europe has spent close to €800 billion in the past 17 months to combat its energy crisis, with Germany spending the most money to protect households and businesses from energy inflation.
Out of the €792 billion, €681 billion was accounted for by the European Union, €103 billion by the United Kingdom, and €8.1 billion by Norway.
Germany made the highest allocation in the list, setting aside €268.1 billion to shield its energy consumers. The United Kingdom came in second, followed by Italy with €99.3 billion, France with €92.1 billion, and Spain with €40.2 billion.
Spending on Combating Energy Crisis
In terms of percentage of GDP, Slovakia earmarked the most funds for its energy consumers, at 9.3 percent, according to the Bruegel analysis. This was followed by Germany at 7.5 percent, Malta at 7.1 percent, Denmark at 6.1 percent, and Bulgaria at 5.7 percent. Cyprus and Finland set aside less than 1 percent of their GDP for this purpose.European Union nations were found to have imposed a slew of measures to combat energy inflation, including reducing energy tax/value-added tax (VAT), regulating retail prices, fund transfers to vulnerable groups, support to businesses, and so on.
Excluding Germany, €217 million were set aside for untargeted price regulation measures, with only €33.57 million set aside for targeted price measures.
The €792 billion measure to counter the energy crisis brings it into the same league as the EU’s COVID-19 recovery fund that had amounted to €750 billion.
Germany has faced criticism for the large size of its energy aid package as some have expressed worries about Berlin’s policies derailing energy control measures in Europe as a whole.
A Homemade Crisis
In 2021, following the COVID-19 lockdown, energy demand in Europe “came back with a vengeance,” the Dec. 19th IER analysis states.However, Europe had taken a slew of measures that negatively affected its energy output, including banning hydraulic fracking, shuttering coal and nuclear plants, and cutting leases for oil and gas production, all the while pushing the transition to renewable energy.
Due to these policies, Europe did not have the energy supply to meet its demand, IER claims. As a result, the region was forced to deplete its energy reserves, with the Russia–Ukraine conflict adding to its woes.
“Now, Europe is faced with energy shortages, skyrocketing energy prices, and major uncertainty regarding its energy and economic future. Yet, it has not given up on its energy transition to renewable energy (wind and solar power) despite their weather dependency and lack of firm power capability,” the analysis stated.