How European countries are spending billions on easing energy crisis

European governments are announcing emergency measures on a near-weekly basis to protect households and businesses from the energy crisis stemming from Russia's war in Ukraine.

How European countries are spending billions on easing energy crisis
Photo by Arthur Lambillotte on Unsplash

Hundreds of billions of euros and counting have been shelled out since Russia invaded its pro-EU neighbour in late February.

Governments have gone all out: from capping gas and electricity prices to rescuing struggling energy companies and providing direct aid to households to fill up their cars.

The public spending has continued, even though European Union countries had accumulated mountains of new debt to save their economies during the Covid pandemic in 2020.

But some leaders have taken pride at their use of the public purse to battle this new crisis, which has sent inflation soaring, raised the cost of living and sparked fears of recession.

After announcing €14billion in new measures last week, Italian Prime Minister Mario Draghi boasted the latest spending put Italy, “among the countries that have spent the most in Europe”.

The Bruegel institute, a Brussels-based think tank that is tracking energy crisis spending by EU governments, ranks Italy as the second-biggest spender in Europe, after Germany.

READ ALSO How EU countries aim to cut energy bills and avoid blackouts this winter

Rome has allocated €59.2billion since September 2021 to shield households and businesses from the rising energy prices, accounting for 3.3 percent of its gross domestic product.

Germany tops the list with €100.2billion, or 2.8 percent of its GDP, as the country was hit hard by its reliance on Russian gas supplies, which have dwindled in suspected retaliation over Western sanctions against Moscow for the war.

On Wednesday, Germany announced the nationalisation of troubled gas giant Uniper.

France, which shielded consumers from gas and electricity price rises early, ranks third with €53.6billion euros allocated so far, representing 2.2 percent of its GDP.

Spending to continue rising
EU countries have now put up €314billion so far since September 2021, according to Bruegel.

“This number is set to increase as energy prices remain elevated,” Simone Tagliapietra, a senior fellow at Bruegel, told AFP.

The energy bills of a typical European family could reach €500 per month early next year, compared to €160 in 2021, according to US investment bank Goldman Sachs.

The measures to help consumers have ranged from a special tax on excess profits in Italy, to the energy price freeze in France, and subsidies public transport in Germany.

But the spending follows a pandemic response that increased public debt, which in the first quarter accounted for 189 percent of Greece’s GDP, 153 percent in Italy, 127 percent in Portugal, 118 percent in Spain and 114 percent in France.

“Initially designed as a temporary response to what was supposed to be a temporary problem, these measures have ballooned and become structural,” Tagliapietra said.

“This is clearly not sustainable from a public finance perspective. It is important that governments make an effort to focus this action on the most vulnerable households and businesses as much as possible.”

Budget reform
The higher spending comes as borrowing costs are rising. The European Central Bank hiked its rate for the first time in more than a decade in July to combat runaway inflation, which has been fuelled by soaring energy prices.

The yield on 10-year French sovereign bonds reached an eight-year high of 2.5 percent on Tuesday, while Germany now pays 1.8 percent interest after boasting a negative rate at the start of the year.

The rate charged to Italy has quadrupled from one percent earlier this year to four percent now, reviving the spectre of the debt crisis that threatened the eurozone a decade ago.

“It is critical to avoid debt crises that could have large destabilising effects and put the EU itself at risk,” the International Monetary Fund warned in a recent blog calling for reforms to budget rules.

The EU has suspended until 2023 rules that limit the public deficit of countries to three percent of GDP and debt to 60 percent.

The European Commission plans to present next month proposals to reform the 27-nation bloc’s budget rules, which have been shattered by the crises.

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Closing churches and switching off saunas: How Sweden is saving energy

A nationwide effort to save electricity is underway as Sweden faces sky-high energy prices this winter. From closed churches to switched-off saunas, here's how Sweden is reacting ahead of winter.

Closing churches and switching off saunas: How Sweden is saving energy

Closed churches

Churches in many areas of Sweden will be closing or turning off the heating this winter, in an aim to lower energy costs.

In Getinge-Oskarströms parish in Halland, three of the parish’s seven churches are closing, dropping their temperatures to 11 degrees over the winter, P4 Radio Halland reports.

The churches which are going to remain open over the winter season will also be turning down the temperature to 18 degrees, in order to help the parish’s finances throughout the season.

“It’s about keeping our budget in balance,” vicar Joachim Franzén told the radio. “And obviously also about showing solidarity with the rest of society.”

Andreas Månsson engineer of Lund diocese expects that 150 of the diocese’s 540 churches could either fully or partially close this winter to conserve energy.

“There’s no doubt that heating is the greatest expense,” he told newspaper Dagens Nyheter. “Lots of the buildings have quite bad insulation. Lund diocese has invested a lot in making the buildings more efficient, but we’re still talking about large buildings with a large volume that swallows up heating.”

Markus Dahlberg, head of the cultural heritage support unit at the national office of the Church of Sweden told the newspaper that these kind of measures are being discussed in many areas in Sweden, but especially in the south where energy prices are highest.

“Many churches are in rural towns,” he told DN. “In congregations with lots of buildings and a low base in terms of membership fees, the responsibility for taking care of church buildings becomes a greater burden.”

Lowered temperature in swimming pools and turning off saunas

In Malmö, the city council is considering lowering the temperature in the city’s indoor and outdoor swimming pools, the city’s mayor Katrin Stjernfeldt Jammeh told public broadcaster SR.

“We have very energy-intensive leisure centres with saunas, with heated swimming pools for example, that’s the kind of thing we’re looking at to see if we need to close down temporarily or turn down,” she said.

The city’s director of recreational facilities, Johan Hermansson, told Sydsvenskan newspaper that his department is investigating the possibility of lowering water temperature levels, as well as energy saving measures to do with indoor temperatures, ice rinks, lighting and saunas.

“We’re not currently planning on lowering the temperature in the pools,” he said, “but we are looking at whether we can do something with the relaxation areas at the swimming pool in Hyllie and the saunas we have in our facilities”.

It’s not just public buildings who are closing their sauna facilities – gym chain Sats has decided to close their sauna facilities in multiple gyms, P4 Radio Gothenburg reports, blaming the decision on high energy prices.

Some bostadsrättsföreningar or housing associations have also taken the decision to close sauna facilities – the board of The Local reporter Becky Waterton’s housing association in Skåne recently put a note up in their stairwell stating that the associations’ saunas will be closed until April 2023.

Authorities also have a role to play

Government authorities have also been told to enact energy-saving measures, energy minister Khashayar Farmanbar and public administration minister Ida Karkiainen from the outgoing Social Democrat government said in a press conference before September’s election.

Almost 200 municipalities have been tasked by the government to lower their energy use before winter.

“It’s important that all of society contribute towards lowering energy usage,” Farmanbar said. “State authorities and the public sector can and should lead the way on this.”

Some proposed measures included changing lightbulbs and fittings or using more energy-effective technology, as well as controlling lighting and ventilation so they’re only in use when they have to be, and not at night, for example.

“All measures won’t suit everyone, but everyone can do something,” Farmanbar said.