WASHINGTON, April 14 (Reuters) - European governments' measures to alleviate the impact of high energy prices on businesses and consumers must have a clear end-date and be focused to avoid the
EU Urges End Dates on Energy Relief to Prevent Repeat of 2022 Crisis
European Commissioner Calls for Targeted and Time-Limited Energy Support Measures
Background: Lessons from the 2022 Energy Crisis
WASHINGTON, April 14 (Reuters) - European governments' measures to alleviate the impact of high energy prices on businesses and consumers must have a clear end-date and be focused to avoid the mistakes of the energy crisis of 2022, European Economic Commissioner Valdis Dombrovskis said.
IMF Discussion Highlights
Speaking at the International Monetary Fund, Dombrovskis said any moves to ease the pain of the high prices caused by the closure of the Strait of Hormuz as a result of the U.S.-Israeli war on Iran should avoid boosting demand for fossil fuels.
Fiscal Impact of Prolonged Support
"One key lesson from the last energy crisis is that measures were often insufficiently targeted and remained in place for too long, making them much more fiscally costly than necessary. This is something we want to avoid now," Dombrovskis said in a conversation with IMF European Department head Alfred Kammer.
Current Economic Context and Policy Recommendations
He said higher debt and deficits as well as higher interest rates than during the 2022 energy crisis caused by Russia's war on Ukraine made it now more important for EU governments to avoid costly, lengthy measures to cushion energy price spikes.
Importance of Sunset Clauses and Demand Management
"One message we are trying to reinforce is that measures should come with clear sunset clauses to ensure they remain time-limited. They should also avoid increasing demand for oil and gas at a time when demand should be declining," he said.
Challenges of Implementing Targeted Relief
"The problem is that broad measures, such as across-the-board tax cuts, are easier to implement politically and administratively. Targeted measures require defining eligibility thresholds, which takes more effort," Dombrovskis said.
"Given today’s tighter fiscal space and financial conditions, we need to be much more focused and targeted in our response," he said.
Responses from EU Member States
Some EU countries seem to be heeding some of the advice. Germany decided on Monday on fuel price relief for consumers and businesses worth 1.6 billion euros for two months, while France said any support measures would be only for sectors most in need and be renewed on a monthly basis.
(Reporting by Jan Strupczewski, editing by Deepa Babington)
