PREVIEW-Euro zone to discuss economic hit from soaring energy prices

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BRUSSELS, Sep 30 (Businesshala) – Eurozone finance ministers will discuss hikes in energy prices on Monday, worried they could slow the economic recovery, impact investment decisions and disproportionately affect the poorest people. can be affected, a European Commission note showed.

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The note prepared for the ministers’ meeting in Luxembourg, however, said any policy response would first have to determine how temporary or permanent the energy price hike was.

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The European Central Bank believes that the prices of more expensive gas, oil and electricity are only temporary and will ease in 2022 and many euro area governments agree.

But the ministers will discuss the issue separately and share best practices to tackle the problem as they need to prepare the 2022 budget which will be heavily impacted by energy costs.

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“The current rise in energy prices is already affecting economies and the impact of higher prices on the national budget needs to be discussed,” said the commission’s note, seen by Businesshala. “The type of responses is also influenced by whether the issue is largely viewed as a supply or demand problem,” it said.

“From handling supply (investments) to demand management (subsidies and national taxation measures) as well as broader competition and regulatory aspects, a wide spectrum of policy options and levers are open to governments,” it said.

Benchmark European gas prices have risen more than 300% this year due to factors including low storage levels, outages and high demand, as economies recover from the COVID-19 pandemic, which drives up the cost of bulk electricity.

“From an economic point of view, higher energy prices have the potential to slow the recovery. The assumptions about electricity, gas and overall prices are an important input in preparing budgetary plans, especially in light of the recent volatility,” the commission said.

EU leaders will also discuss rising prices at the next meeting on 21-22 October.

“The current situation points to the need for greater investment in renewable energy sources as economies move away from fossil fuels, as well as the importance of implementing green reforms,” ​​the commission’s note said.

“There is a risk that higher energy prices will also adversely affect lower income groups and older households (energy poverty), which is a particular concern in the winter months,” it said. (Reporting by Jan Stroopzewski; Editing by Toby Chopra)

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