The inflation rate in Europe rose to 8.9 percent in July, the highest level since the euro zone was founded. As a result, citizens across Europe have less money in their pockets. Prices have risen the most in the energy sectors – i.e. electricity, fuel and heating – followed by food, alcohol and tobacco. Governments everywhere are trying to relieve their citizens with various methods. We looked at what ideas they came up with.
Gas price cap, VAT reduction – how countries help against high electricity and gas prices
Electricity and gas prices in France have been capped by the state since autumn 2021. The gas tariffs for households were frozen at the level of October 2021. The measure was initially due to expire in July 2022, then the government extended it until the end of the year. Electricity prices may be increased by a maximum of four percent this year. This measure is costing the French government more than 20 billion euros.
The governments in Spain and Portugal have also capped the gas price for electricity generation for a year since mid-June. So that the energy suppliers do not make any losses, the state reimburses them the difference between the price cap and the real gas price. The EU Commission estimates the costs of the gas price cap at 8.4 billion euros for the entire year. Of this, 6.3 billion are in Spain, the rest in Portugal. There are no network charges for consumers in Italy and there is a reduction in VAT on gas bills. The Greek government has been paying for about a third of electricity bills since January.
The Austrian government is taking a different approach than just capping the price of electricity. There it is envisaged that households and companies will pay a relatively low electricity price up to a certain level of consumption. If you consume more, you pay the usual market price for it. The Austrians plan to introduce this “electricity price brake” in autumn. It is still unclear up to which price and consumption level the low price applies. It will depend on what the measure will cost the state.
In the first half of the year, Italy released more than ten billion euros in order to depress energy prices for consumers and companies. The high electricity and gas prices are not generally, but capped on the energy bills. The situation is similar in Great Britain, where the state has capped energy prices for private households. In Hungary, electricity and gas prices were reduced by 25 percent and frozen.
One-time payment & fuel discount: What measures other countries are using against expensive fuels
In Germany, you pay a reduced tax on fuels such as diesel and petrol for three months. At the same time, the nine-euro ticket was introduced as an accompanying measure for local public transport. In Sweden, too, the fuel tax was lowered to the EU minimum level, albeit a little longer than in Germany, namely for five months. The Poles are doing the same, where the VAT rate for petrol and diesel has been reduced from 23 to 8 percent.
The government in Sweden also distributes a one-off payment to car owners of around one hundred euros. Since the end of March, there has also been a tank discount of 30 cents per liter in Italy. This measure is now to be extended, probably until mid-October. Among other things, Italy is financing this with a tax on the extra profits of the energy companies. Spain will reimburse customers at petrol stations for 20 cents per liter of petrol and diesel until the end of June. For the Portuguese there were vouchers at the pumps.
Since April 1st, people in France have benefited from a tank discount. The state pays compensation to wholesalers. Belgium has reduced taxes on diesel and petrol to 17.5 cents per liter. In the Netherlands, taxes on petrol and diesel have been reduced by 21 percent. In Hungary, there has been an upper limit for petrol and diesel of 480 forints (1.17 euros) since November. The Austrians don’t want a tank discount, after experience in the border areas they are of the opinion that it doesn’t work in Germany and Italy either. In the Alpine state, the antitrust authorities are required to take a close look at whether hidden agreements are being made by the oil companies. The petrol stations are allowed to lower the price several times a day, but only go up once and apparently that helped.
Which governments distribute vouchers or energy packages
Germany has the energy price flat rate, which is to be paid out with the September salary. However, it is taxable, which means that you will probably not receive the full 300 euros. Belgium does it similarly: Every household there should receive a one-time payment of 100 euros. With us, recipients of housing benefit and student loans also receive a subsidy for heating costs.
The Swedes increase the housing benefit. In France, around six million low-income households were given an energy check for €100. Employers also have the option of paying out a purchasing power premium. The maximum amount of this is 3000 euros. There is only a bonus for a certain group in the Netherlands. Households with very low incomes receive a one-off allowance of 800 euros each. The Danes receive the same amount of money: there, up to a certain income, there is a heat check.
On the British Isles, private households get a one-time waiver of £200 (around €240) on their energy costs, but they have to pay this back to the government. In Italy, all workers and pensioners below the €35,000 income limit received inflation compensation in July in the form of a one-off payment of €200. In Slovenia there are energy vouchers worth 150 euros. Greek pensioners received a one-off payment of 200 euros.
These countries resort to tax adjustments to provide relief
Belgium has temporarily reduced VAT on electricity and gas from 21 to 6 percent. The Dutch government has reduced VAT on energy from 21 to 9 percent. Germany has abolished the EEG surcharge to promote green electricity via the electricity bill since July. Spain has already reduced VAT on electricity to ten percent in 2021. Poland has completely exempted gas and fertilizer from VAT. In the neighboring country, the Czechs are currently not paying taxes on road traffic. Croatia has drastically reduced VAT on gas. Federal Finance Minister Christian Lindner (FDP) also recently presented proposals for tax relief. However, these still have to go through the cabinet.
How much is that?
In Germany, however, the relief packages had an effect. In June, thanks to the fuel discount and the €9 ticket, inflation lost some of its momentum. The measures also helped in France. According to data from the European statistics office Eurostat, inflation there in July was below the average for the euro area.