European Union flags fly outside the European Commission headquarters, in Brussels, Belgium, on March 1.JOHANNA GERON/Reuters
The European Commission recommended on Wednesday that all EU governments end support measures for energy prices by the end of this year to keep public finances in check and stay in line with proposed new fiscal rules in 2024.
“All Member States should wind down the energy support measures in force by the end of 2023,” the EU executive arm said in its annual recommendations, the fulfilment of which now has an impact on getting EU grants from the Recovery Fund.
“Should renewed energy price increases require the implementation of support measures, these should be targeted at protecting vulnerable households and firms, fiscally affordable, and preserve incentives for energy savings,” it said.
Most of the EU’s 27 countries introduced various measures to mitigate the impact of soaring energy prices last year, when Russia’s invasion of Ukraine sent gas and oil prices rocketing.
The Commission estimates these energy support measures in 2023 range from 0.2 per cent of GDP in Greece, to 0.6 per cent in Spain, 1 per cent in France and Italy and 2 per cent of GDP in Germany.
But with energy prices lower again, such support is harder to justify and would leave many countries unable to meet their net primary expenditure limits recommended by the Commission under a reform of EU fiscal rules.
Under the reform, which governments and EU institutions hope to complete this year, each EU country would negotiate its own debt reduction path with the EU executive, taking account of different starting points in the 27-nation bloc, where Greece has a public debt of 171.3 per cent of GDP while Estonia has 18.4 per cent.
The main instrument to control debt would be a government’s net primary spending, for which the Commission would set a path.
In its individual recommendations for EU countries, the Commission said the biggest EU economy Germany should keep the increase in net primary spending next year to a maximum of 2.5 per cent, with second biggest France at 2.3 per cent.
Third biggest Italy, which has slow growth and the second biggest debt pile in Europe at above 140 per cent of GDP, should have the least room for manoeuvre with net spending in 2024 not rising more than 1.3 per cent, the Commission said.
Fourth biggest Spain can raise spending next year by a maximum 2.6 per cent of GDP, the same as Greece, which, even though it has a bigger debt than Italy, also has faster growth.
“We recommend that our member states move towards more prudent fiscal policies,” Commission Vice President Valdis Dombrovskis told a news conference.