The European Commission and European Central Bank chief Christine Lagarde urged EU governments to stop energy support measures to citizens.
Speaking at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament on Monday ECB chief Lagarde said:
“As the energy crisis fades, governments should roll back the related support measures promptly and in a concerted manner to avoid driving up medium-term inflationary pressures, which would call for a stronger monetary policy response.”
“The ECB welcomes the European Commission’s recommendation to Member States to wind down in 2023 the fiscal measures taken in response to the energy price shock,” she added saying at the same time that “domestic demand, especially consumption, remains weak.”
On Monday the European Commission said it had decided not to prolong emergency measures introduced last year to shield consumers from soaring energy prices, adding those measures had helped to contribute to a calming of European energy markets.
At the end of 2022, the 27-member European Union was in the midst of an acute energy crisis fuelled by Russia’s invasion of Ukraine, with member states then ploughing hundreds of billions of euros into tax cuts, handouts and subsidies to tackle the crisis, REUTERS recalled.
“The Commission confirms that it will not propose a prolongation of these crisis measures,” it said in a statement, reminding these included electricity demand reduction measures, revenue caps for power plants and retail price setting rules.”
It added that electricity prices have now decreased to less than 80 EUR/MWh and gas prices have not only fallen but also stabilised, to the extent that the electricity price spikes observed throughout 2022 are considered “less probable to occur in the upcoming winter”.
The Commission also said that some aspects of the emergency measures had been included in its proposals for longer-term structural adjustments in the electricity market design.
Those proposals aim to try to increase the use of fixed-price power contracts, shield consumers from price spikes and speed up the shift to renewable energy, REUTERS reported.