Annual inflation in the Eurozone hit 5.1% in January, with by far the largest driver of rising prices being energy. Energy inflation stood at 29% – the highest figure on record . Clearly, the UK is not alone in its struggle with rising costs of living. Indeed, Cebr estimates that, without government intervention, energy prices across the Eurozone could rise by up to 40% in 2022, up from 13% in 2021. Different governments are dealing with this crisis in different ways. Here, Cebr studies the five largest euro area economies to see what alternatives there are to the UK’s plan, that will see electricity customers receive a repayable £200 discount on their bills from October. There will also be a £150 council tax rebate in April for council tax bands A to D.
France is taking the hardest stance. The Government has frozen increases in household electricity bills at 4% in 2022 and also frozen any increase in gas prices until April. However, with diesel and fuel accounting for a third of average household energy expenditure, many will still feel the impact of rising energy prices at the petrol station.
Similarly, in Spain, the Government has announced a cap on increases in gas price under regulated tariffs and introduced a series of tax cuts to reduce consumer bills until May 2022. On the other hand, Germany has no energy price cap and a small relief is expected to come from a 43% cut in a power surcharge that only makes up 20% of households’ energy bills. In January, energy price inflation was 21% but this could rise up to 30% over the year on average across households. For the worst hit, industry data suggest that there could be a rise in electricity bills of over 60% in 2022 .
In Italy, energy price inflation reached 39% in January and could even exceed 50% in some months this year if no additional measures are announced. So far, while the Government has already earmarked €3.8 billion this year to cushion the impact on households, it is mainly working on a package of longer-term structural reforms of the energy market.
The Netherlands has seen one of the sharpest upticks in energy price inflation thus far, with inflation reaching 59% in January. However, this is expected to decrease over the course of the year in view of the support from the Government to cut energy taxes that should save households around €400 a year. With energy weighted to make up 11% of inflation in the Eurozone, households are bound to feel the crunch this year even with government intervention. However, many policies across the euro area are set to shield consumers from the effects of higher global energy prices to a far greater extent than the provision of the UK government. Yet, if prices stay high, most of these policies to protect households will be hard to afford for governments which are already highly indebted. Therefore, it appears that most European nations are expecting energy prices to fall within the next two years. If that doesn’t happen, then they are likely to face difficulties. Fortunately, Cebr is forecasting that energy prices will fall back towards the end of this year– but if we’re wrong it could prove costly for public finances across the continent.
 The energy component of the HICP includes household expenditure on electricity, gas, diesel, petrol and other fuels
 Germany mulls scrapping energy bill surcharge early as prices rise, Reuters 2022
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