European Governments Are Doling Out Cash to Quell Energy Ire

(Bloomberg) -- European governments are looking to take the sting out of rising prices for energy and other goods to retain voter support for sanctions against Russia for its invasion of Ukraine.

Germany’s cabinet on Wednesday approved a measure to provide 4.5 billion euros ($5 billion) in tax relief for consumers and is debating further aid. France’s Prime Minister Jean Castex introduced fresh measures to help the economy cope with rising energy and raw-material prices, including grants for energy-intensive companies estimated to cost around 3 billion euros, and an extension of state-guaranteed lending.

Other countries are also honing plans. Greece is set to announce measures on Thursday, and Italy’s cabinet will discuss more aid on Thursday. Spain is considering power price caps and plans to announce a series of tax breaks by the end of March. Portugal has already reduced its fuel tax and offered a 400 million-euro credit line for affected industries. 

Read more: France Unveils Resilience Plan Aiding Energy-Intensive Companies

The initiatives by Europe’s two biggest economies have political components. France’s presidential election is less than a month away, and the country is starting to see its first protests linked to price increases, with truckers, farmers and fishermen blocking two ports in Brittany on Tuesday. 

President Emmanuel Macron’s government is particularly attentive to the issue of energy prices since the Yellow Vest crisis erupted in 2018. The movement demanding more economic equality was sparked by a tax raise on fuel prices. It announced sector-specific measures for fishermen, farmers and hauling companies.

In Germany, regional elections in Saarland on the French border are looming later this month -- the first since September’s national vote -- and surging gasoline prices have become a touchstone. 

Tobias Hans, the premier of the state who is running for re-election for the Christian Democrats -- the leading opposition party in German parliament -- posted a video on Twitter last week railing against fuel prices. Truckers are planning to disrupt Autobahn traffic on Wednesday to protest increased costs, local media reported.

In Chancellor Olaf Scholz’s coalition, the business-friendly Free Democrats and the Greens are bickering over how to handle risks posed by the country’s exposure to Russian energy.

Read more: Germany’s Coalition at Odds Over Response to Energy Crisis

Finance Minister Christian Lindner, the head of the Free Democrats, raised hackles among the Greens with his proposal for a gasoline rebate to help motorists and businesses struggling with higher pump prices -- a move criticized as helping mainly wealthy consumers.

The temporary rebate is aimed at bringing the price of a liter of gasoline back below 2 euros per liter and could cost the government as much as 2 billion euros a month.

Ricarda Lang, a co-leader of the Greens, has pushed back, calling for a broader relief package. “Exploding heating costs and high food costs” also need to be tackled, Lang said in an interview with public broadcaster ZDF late Tuesday. 

In France, the government has insisted that the latest plan won’t be as expansive as the aid provided during the pandemic -- a package Macron described at the time as a “whatever-it-costs” approach. Still, it is set to cost billions of euros, depending on the evolution of energy prices.

Measures also include extending aid for furloughed workers in case of factory shutdowns from supply-chain disruptions, and delayed tax collection for companies facing higher energy costs and export difficulties.

More broadly, the government said on Sunday that it will provide a rebate of 15 euro cents per liter on gasoline and diesel. That will apply for four months starting April 1, costing the government about 2 billion euros.

(Update with details on French measures throughout)

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