Europe is subsidising its way into a deeper energy crisis

By&nbspJudith Arnal, PhD successful Economics and a State Economist successful Spain and Senior Research Fellow astatine CEPS, Elcano Royal Institute and Fedea.

Published on 22/04/2026 - 10:46 GMT+2

The Strait of Hormuz blockade has handed Europe its 2nd large vigor daze successful 4 years. Governments person responded with speed, but without learning. T

he Governor of the National Bank of Belgium, Pierre Wunsch, enactment it bluntly: "We indispensable chiefly trim request now." Broad vigor enactment measures, helium warned, would beryllium similar "pouring gasoline" connected the problem.

He is right. Yet astir governments are doing precisely that – repeating the mistakes of 2022 with striking precision, and successful immoderate cases making them worse.

Suppressing terms signals means prolonging the crisis

A comparative appraisal of fiscal measures adopted by Germany, France, Italy, Spain, Poland and Hungary against the European Central Bank's (ECB) triple-T model – targeted, tailored, impermanent – reveals not a azygous subordinate authorities afloat satisfies it.

The logic down the 3 criteria is elemental and unanswerable: enactment straight those who cannot sorb the daze (targeted), sphere the terms awesome that drives the request accommodation Europe desperately needs (tailored), and expire earlier exigency measures harden into imperishable entitlements (temporary).

Every euro spent suppressing the terms awesome is simply a euro spent prolonging the crisis.

The hierarchy of nonaccomplishment is clear

The hierarchy of nonaccomplishment is clear. At the bottommost beryllium Hungary and Poland, whose nonstop terms caps connected petrol and diesel suppress the terms awesome entirely, payment high-consumption households most, and resistance successful secondary distortions, similar an export prohibition connected crude and refined products successful Hungary's lawsuit and substance tourism successful Poland's.

Spain, Italy and Germany inhabit the adjacent rung, joined by Hungary and Poland connected this dimension: each 5 present deploy wide Value Added Tax (VAT) oregon excise work cuts that neglect targeting and tailoring simultaneously, with benefits that turn with consumption. The Commission has already questioned whether the Spanish and Polish VAT cuts connected centrifugal fuels are compatible with the VAT Directive.

Yet not everything is poorly designed. Spain's reinforced thermal voucher – a nonstop income transportation to households identified done vulnerability criteria — is 1 of the fewer measures that passes each 3 tests. Italy's sectoral taxation credits for transport, fisheries and agriculture bash not intervene straight successful prices and people sectors with demonstrable exposure, though they stay tied to substance consumption, which blunts the inducement to set demand.

France stands unsocial arsenic the subordinate authorities that has travel closest to the ECB's benchmark. Paris chose not to intervene successful pump prices contempt transport-sector protests, relying alternatively connected administrative tools – 500 inspections astatine petrol stations to observe abusive margins, liquidity enactment done Bpifrance, and deferrals of taxation and societal information obligations.

Its €70 cardinal successful budgetary enactment for transport, agriculture and fisheries is the weakest link: inactive tied to substance consumption. But the French attack is astatine slightest coherent.

European levy connected bonzer profits of vigor companies

Beyond nationalist measures, 5 governments person turned to the question of who should concern them. On 3 April, the Finance and Economy ministers of Austria, Germany, Italy, Portugal and Spain sent a associated missive to Commissioner Wopke Hoekstra urging the Commission to develop, arsenic a substance of urgency, a European levy connected bonzer profits of vigor companies – echoing the solidarity publication adopted nether Regulation 2022/1854.

But the 2022 levy got 2 things wrong, and a 2nd effort indispensable not repetition either. It taxed the incorrect basal and it fto subordinate states opt retired oregon plan nationalist equivalents with nary binding standard, fracturing the azygous marketplace – Spain, for instance, taxed nett turnover, which has thing to bash with windfall gains.

Any caller instrumentality indispensable autumn connected genuine economical profit. And adjacent then, a windfall levy should not go a reflex: arsenic the sector's ain taxation bases broaden with higher prices, revenues volition emergence without one.

Governments indispensable halt treating the terms awesome arsenic the enemy

The signifier is damning, and the medicine is not optional. Governments indispensable halt treating the terms awesome arsenic the enemy. Blanket tax cuts and terms caps should beryllium replaced instantly with nonstop income transfers for susceptible households and liquidity enactment and non-earmarked taxation credits for exposed sectors.

Emergency measures should expire not connected calendar dates that politicians tin softly extend, but connected predefined marketplace triggers that depoliticise the withdrawal decision. And the Commission should found an ex ante notification and appraisal framework, grounded successful the ECB's triple-T criteria, truthful that Member States recognize the aggregate interaction of their measures earlier adoption, not after.

The alternate – different circular of untargeted subsidies that hold accommodation and deepen fiscal holes – is not crisis management. It is situation prolongation.

Judith Arnal holds a PhD successful Economics and is simply a State Economist successful Spain. She is besides a Senior Research Fellow astatine the Centre for European Policy Studies (CEPS), the Elcano Royal Institute and the Fundación de Estudios de Economía Aplicada (Fedea).