Analysis: European governments set aside €500bn to subsidise gas and electricity bills

The measures to shielc consumers from soaring energy prices are "clearly not sustainable from a public finance perspective," said Bruegel senior fellow Simone Tagliapietra.

European governments earmark €500bn to shield citizens and companies from soaring gas and power prices, according to think-tank Bruegel.

Germany completed the nationalisation of gas importer Uniper, and Britain said it would halve energy bills for businesses in response to a deepening energy crisis that has exposed Europe's reliance on Russian fuel.

Russian president Vladimir Putin added to the upward pressure on energy prices by announcing a partial military mobilisation, in the biggest escalation of the Ukraine war since Moscow's February 24 invasion. 

European governments had already earmarked almost €500bn in the last year to shield citizens and companies from soaring gas and power prices, according to research by think-tank Bruegel. Uniper has been among the biggest corporate casualties, with Germany earmarking an additional €8bn on Wednesday in the latest step of a €29bn bailout.

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France, also among the high spenders, will allocate €9.7bn to take full control of utility giant EDF. 

Britain said its new plan to help businesses would cost "tens of billions of pounds". 

"We have stepped in to stop businesses collapsing, protect jobs, and limit inflation," Britain's finance minister Kwasi Kwarteng said of the cap on wholesale electricity and gas costs for businesses.

More than 20 British power providers have collapsed, many crumbling because a government price cap prevented them from passing on soaring prices. Uniper's full nationalisation will involve the German government buying out Finland's Fortum. 

"This is clearly not sustainable from a public finance perspective," Bruegel senior fellow Simone Tagliapietra said of Europe's overall energy crisis bill. 

Governments with more fiscal space will inevitably better manage the energy crisis by outcompeting their neighbours for limited energy resources over the winter months," it said. 

German economy minister Robert Habeck, announcing the Uniper move and other steps to avoid energy rationing this winter, said: "The state will ... do everything possible to always keep the companies stable on the market." 

The Uniper nationalisation gives the German government control of some assets in Russia, a government spokesperson said, adding that it was examining what to do with these.

Germany was more reliant than many others in Europe on Russian gas, mostly supplied via the Nord Stream 1 pipeline. Russia halted flows through the pipeline, blaming Western sanctions for hindering operations. European politicians call that a pretext and say Moscow is using energy as a weapon.

The German government has already put Gazprom Germania, a unit of Kremlin-controlled Gazprom, and a subsidiary of Russian oil company Rosneft, under trusteeship — a de facto nationalisation. Including Uniper's bailout, the bill amounts to about €40bn. 

Meanwhile, a debate is raging across the continent over whether oil companies making record profits because of the energy crisis should pay additional taxes to help consumers cope with soaring inflation.

Total Energies CEO Patrick Pouyanne said on Wednesday that the French energy group was likely to face more than €1bn in additional levies if a proposed EU scheme to impose extra taxes on oil and gas companies was approved. 

Reuters