Even in central and eastern Europe, where support for Ukraine has been strongest, high energy prices threaten to undermine the consensus for sanctions
. The following day Russia shut off gas deliveries through Nordstream 1, its main pipeline to Germany, supposedly for technical reasons. On the morning of September 5th the price of gas on Amsterdam’sRussia’s weaponisation of energy supplies is testing Europe’s financial resources. Governments are struggling to balance relief for citizens and firms with the need to let energy prices rise in order to discourage overuse. They must also avoid getting into bidding wars with each other.
The subsidies will be welcome to cash-strapped citizens, but they will also fuel inflation, which was a hefty 8.8% year-on-year in August. Mr Scholz plans to finance them in part by bringing forward the implementation of a planned 15% global minimum corporate tax. He wants to pay for the electricity-price brake by imposing a cap on profits of firms that generate electricity from wind, biomass, solar and nuclear energy.
These measures are largely deficit-financed. France expects its government budget deficit to remain at 5% in 2023, the same as this year, and three points above that in Germany. Meanwhile the French government is fully nationalising, the national energy giant in which it already holds an 84% stake, to make it easier to force the company to absorb the cost of price caps.
The volume of assistance Italy has provided is impressive. Mr Draghi’s government shelled out €52bn, according to Daniele Franco, the finance minister. Officials say the top priority has been to cap the fuel bills of the poorest, with the next in line being energy-intensive businesses. Because of inflation, higher-than-expected economic growth and tax revenues, the Italian treasury has not yet been forced to borrow more money than expected.
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