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- They treat and maim: record injections into the EU economy may result in a budget deficit
They treat and maim: record injections into the EU economy may result in a budget deficit
Europe is once again sitting on a powder keg. No sooner had the EU countries patched up the holes in their coffers after the pandemic and the Ukrainian crisis, than the war in the Middle East and the blockade of the Strait of Hormuz inflated oil and gas prices. Brussels is trying to resolve the current situation with the help of an economic assistance package. However, this measure may eventually drive budgets into a debt pit, from which they will have to get out for years. Details can be found in the Izvestia article.
In anticipation of high inflation and budget deficit
The European Commission has warned the governments of EU member states that excessive spending to support the economy amid high energy prices could lead to a sharp increase in budget deficits and high inflation, the Financial Times newspaper reports.
European officials began urgently working out response scenarios after another round of rising oil and gas prices against the backdrop of the war between the United States and Israel with Iran and the de facto blockade of the Strait of Hormuz.
EU countries have begun to implement measures to combat high fuel prices. We are talking about subsidies for electricity, lower taxes and excise taxes, and a price ceiling. As explained in the European Commission, these steps should be limited in time and scope. "What happens in one sector of the economy can have an impact on the whole society," said European Commissioner for Energy Dan Jorgensen.
If it comes to a budget crisis anyway, it will be the third for Brussels in the last six years. In 2020, the European Union faced the consequences of the coronavirus pandemic, and two years later, economic problems arose due to the Ukrainian crisis. Over the past seven years, the overall level of public debt in the European Union has increased from 77.8% of GDP in 2019 to 82.1% at the end of last year.
The El Pais publication draws parallels between the current situation and the crisis of 2022, when the EU took a course to abandon supplies from Russia.
Some signs of tension are already visible: in Italy, BP's subsidiary has notified a number of airports in Bologna, Treviso, Venice and Milan of possible kerosene outages due to problems with the main supplier. Slovenia, meanwhile, has imposed limits on gasoline sales at gas stations.
In the event of the most unfavorable outcome, Brussels is ready to resort to the printing of strategic oil reserves again, Jorgensen stressed. At the same time, the European Commissioner noted that the current turbulence risks becoming protracted. Therefore, restrictive measures alone are not enough — stimulating injections into the economy are required.
EU anti-crisis solutions
We are talking about a set of steps: reducing the fiscal burden and excise taxes on electricity and fuel, as well as providing direct subsidies to the most energy-intensive industries and ordinary citizens. The industrial sector can count on an assistance package of about $30 billion.
In addition, the authorities intend to use price control mechanisms by setting marginal tariffs for energy resources in order to stop their uncontrolled rise. An additional source of financing will be a tax on the windfall profits of commodity corporations that have benefited from the economic situation. The received resources are planned to be redirected to subsidize consumers.
However, the European Commission makes an important reservation: the listed support tools are required to be only temporary and metered. Overly large-scale and prolonged subsidies risk unwinding the inflationary spiral and unbalancing the budgets of the participating countries.
Why a budget crisis may occur
The sharp rise in gas and electricity prices is forcing EU governments to spend billions on subsidies, tax cuts and price ceilings.
As of April 2026, the budget deficit of the European Union last year amounted to 3.3% of GDP, in 2024 this figure was lower - 3.1%, said Vladimir Vinogradov, CEO of Pro—Vision Communications, in an interview with Izvestia. At the same time, the Maastricht criteria require that the budget deficit of the EU countries does not exceed 3% of GDP.
— In some countries, this figure exceeded 8%, for example, in Romania — 8.7%, in Poland — 8.5%. In France, it was 5.4%, and in Belgium — 4.9%. In addition, there are other factors that aggravated the budget imbalance in the EU in 2025: an increase in defense spending, including assistance to third countries, an increase in interest payments on government debt, as well as a reduction in the revenue base, the expert explained.
States where high deficits are associated with enormous public debt demonstrate particular vulnerability. These include France (debt 116% of GDP), Belgium (106%), Greece (145%), Italy (138%) and Spain (103%).
Even without taking into account the new large-scale anti-crisis injections, the union deficit is expected to reach 3.4% of GDP, and the national debt will grow to 85%.
It is worth considering that only nine of the 27 EU members are able to provide for themselves, while the rest depend on financial support from the center.
So from the point of view of economic sustainability, Italy, France and Belgium are the countries with the largest economies and the highest debt burden. Romania and Slovakia, which have smaller fiscal reserves, are also at risk. If we look through the prism of industry, then Germany, Italy and Austria should be considered vulnerable, whose production is extremely sensitive to energy tariffs.
The allocation of subsidies carries a double threat: an acceleration of inflation and a sharp increase in the budget deficit. In fact, Europe has been in a state of permanent economic stress since 2022 and has not yet developed a recipe for overcoming it. The current price storm and the need for retaliatory measures are weighing heavily on the economy.
Disappointing forecast
According to the March calculations of the European Central Bank, average inflation in 2026 is projected at 2.6% due to the rise in the cost of hydrocarbons. The regulator warns that unlimited and comprehensive subsidies will only accelerate the penetration of energy inflation into other sectors of the economy.
There are significantly fewer financial reserves for a new major support program today than in 2022. Back then, the shock was stronger, but fiscal discipline was also softer, and interest rates were at a lower level. Under the circumstances, the EU will only be able to provide targeted assistance to households in need for a few quarters. However, most member countries probably won't have the capacity to repeat large-scale tax breaks and widespread resource price restraint.
At the same time, a sharp curtailment of government support is also fraught with negativity. In the short term, this will result in an increase in utility bills, a deterioration in the situation of industry and a decline in the purchasing power of the population. In other words, the abandonment of anti-crisis measures in itself is capable of hitting the economy, accelerating inflation and slowing down GDP growth.
Against the background of the Middle East escalation, gas prices jumped by 70% and oil prices by 60%. EU spending on the purchase of fossil fuels has already increased by €14 billion. An extremely unfavorable picture is emerging: imported price increases are returning precisely at a time when many States are still unable to cope with the consequences of previous shocks for their budgets.
Economists say that the EU is now able to afford only targeted short-term measures implemented at the country level. States are still able to withstand such a burden. A return to the policy of broad and non-targeted subsidies threatens the budgetary system of the association with serious disruptions. The main threat is not even a physical shortage of resources, but a prolonged depletion of financial resources against the background of high prices.
How to get out of the crisis
If the trend continues, public debt will grow (in the EU it has already exceeded 82% of GDP and amounted to € 15.3 trillion), and inflation will accelerate, warned Vladimir Vinogradov.
"As a result, the government will run out of money for other important needs, and a budget crisis may occur when expenditures far exceed revenues," he explained.
To avoid problems, European Commission officials plan to make support short—term and targeted - to help only the most needy citizens and industries, and not everyone, the expert added.
— In my opinion, coordination between countries is currently suffering in the EU and the general budget rules have not been relaxed. Solving these problems will help support the economy without leading to a debt crisis and save funds for the future," the analyst said.
Meanwhile, according to Francesco Sassi, an associate professor at the University of Oslo and an expert on energy geopolitics, the EU leadership was not open enough with the population.
"Now we are really facing the largest disruption in the supply of oil to the market coming from the Middle East. We have never seen such a failure in history," the expert said.
According to him, Brussels does not tell the population how serious this problem is, but instead prepares "vague measures and a set of tools."
"But the real problem is that the longer the crisis continues, the more stringent measures will need to be applied not only at the EU level, but also at the national level," the expert emphasized.
The analyst is concerned that national governments in this case will begin to unilaterally take measures and subsidize energy consumption or try to ensure the supply of energy resources for their country.
"And this will inevitably lead to an increase in the cost of natural gas and oil for European consumers," the European expert concluded.
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