European governments have so far announced limited support measures to deal with high energy prices, but Fitch warns that widening them could have medium-term consequences for public finances.
Specifically, according to a senior analyst at Fitch Ratings, horizontal interventions by European governments to protect households and businesses from high energy prices could have a significant impact on their public finances if they are expanded.
So far, European governments have announced significantly smaller support packages in the wake of the war with Iran, compared with those adopted after the Russian invasion of Ukraine in 2022, Reuters reports.
Of course, they have focused on measures of universal application, such as fuel tax cuts, while economists have warned that they should focus on targeted measures – such as those for lower-income households – given their already strained budgets.
Greece the only one with targeted measures, according to Fitch
Federico Bariga-Salasar, head of Western European sovereign ratings at Fitch, said in a webinar that the measures so far have been “very small”, ranging from 0.3% of GDP in Spain to less than 0.01% of GDP in France and Britain, reflecting tighter budgets in the latter two countries.
He added that uncertainties surrounding energy developments may lead some countries to take additional support measures in the future.
“Unfortunately, so far, most of these (measures) have been untargeted. The only country that has really implemented targeted measures is Greece,” Bariga-Salasar said.
“This could of course have a significant impact on public finances in the medium term if the scope of these measures increases.”
