EU Running Out of Steam to Counter Record Energy Crisis

Central bankers warn of potential rationing as the Persian Gulf shutdown enters its eighth week, leaving debt-laden European nations with limited fiscal room to intervene. Make us preferred on Google Share Facebook X (Twitter) LinkedIn Bluesky Email Copy Copied The fuel prices are on display at a gas station in Berlin on April 24, 2026. (Photo by Tobias SCHWARZ / AFP) Content Share Facebook X (Twitter) LinkedIn Bluesky Email Copy Copied Flip Make us preferred on Google Central bankers are starting to worry as the shutdown of the Persian Gulf – from where a fifth of the world’s oil and seaborne gas is normally shipped – enters the eighth week. “Every day the conflict continues, the wider the gap between energy supply and demand and the longer the normalisation,”  said  the ECB’s Christine Lagarde this week. She raised the spectre of going “from prices to rationing”. The International Energy Agency calls it the ‘biggest ever’ energy crisis. Follow our coverage of the war on the @Kyivpost_official . The EU’s response so far suggests otherwise. The bloc has committed just shy of €10 billion to address the spike in diesel, petrol and natural gas prices, according to  Euractiv  calculations – mostly thanks to large amounts put forward by Berlin and Madrid. A far smaller cheque this time round Germany’s  ill-advised return  to slashing excise duties on fuel is worth €1.6 billion – just shy of 0.05% of GDP. Even accounting for the full impact of the country’s €1,000 tax-free bonus scheme – which Deutsche Bank estimates could cost €6–12 billion in lost taxes – Europe’s crisis response pales in comparison to 2022. Germany alone disbursed an extra €15 billion between February and April of 2022; Italy spent €13 billion, and France around €12 billion, according to data  collected  by think tank Bruegel. Other Topics of Interest German Chancellor Merz Proposes Phased EU Integration for Ukraine Following the EU summit in Cyprus, Friedrich Merz called for “intermediate steps” and closer institutional ties, while acknowledging that immediate full accession remains impossible at this stage. The obvious question: what changed between 2022 and today? Have Europe’s ‘nanny states’ finally had enough? Some suggest everyone, including politicians, is simply gambling on the fact that the Strait of Hormuz will be open any day now and the worst can be avoided. The Persian Gulf is too important to stay closed for long, an  old argument by analysts  goes. “Markets appear to be betting that the disruption will be short-lived,” Lagarde acknowledged. Politicians, too, could be hedging their bets and distributing aid piecemeal, hoping for a swift end to the latest bout of Trumpflation. The  Tankrabatt  lesson – still unlearned The second argument hinges on institutional and political memory of the 2022 crisis: Europe has just carried out large-scale testing of which interventions work. Take Germany’s infamous €3.4 billion ‘Tankrabatt’ (a fuel subsidy for drivers) last time round, which everyone but politicians and petrol sellers knew was a bad idea. Now, opponents of similar schemes should have concrete evidence to build their case, but are nonetheless losing the fight. The 2026 iteration, pushed by Germany’s Social Democrats, junior partner to Chancellor Friedrich Merz’s centre-right Christian Democrats, comes in at just €1.6 billion despite the fuel crisis being arguably much more severe. Meanwhile, other governments across Europe have already adopted generous, undirected subsidies. No fiscal fuel left in the tank But the biggest reason for Europe’s lacklustre response to the looming economic crisis caused by the latest Middle East war is that the bloc has no gas left in the tank – literally, because gas storage is at a nine-year low. When the Covid-19 pandemic hit, government debt in the EU sat at 77.5% of GDP, France and Germany at 58.7% and 98.2% respectively. By the time it was over, EU debt was up 9 percentage points, ditto for Germany, and France was up 14 percentage points, fuelled by a low-interest-rate lending bonanza. Lagarde said the EU’s 2002 fiscal response “amounted to 1.7% of GDP”, slamming the pandemic-era “expectation” that governments would shield households and firms from any shock. Now, Europeans could be left holding the bag for real. In 2026, France has less fiscal space than ever and Q4 2025 debt sat at 116%. Germany is still at 63.5% (and just greenlit a €500 billion extraordinary borrowing push), and EU debt is also above pre-pandemic levels of 81.7%. Maintaining Europe’s massive deficits is also becoming increasingly expensive as interest rates go up, acting as an additional deterrent. Southern push to bend the rules again That, of course, hasn’t stopped Rome from pushing to suspend the EU’s fiscal rules. “We need to approach this with greater openness, effectiveness and efficiency, and this also applies to the Stability [and Growth] Pact,” Italy’s prime minister Giorgia Meloni said in Cyprus on Thursday. Both Meloni and Spain’s centre-left Prime Minister Pedro Sanchez are pushing for the crisis response to be exempted from the EU’s fiscal rulebook. “We need to consider a model where the expenditures aren’t counted,” Meloni said. Just as constraints often underpin genuine innovation – art students are taught to work within strict parameters before being given full creative rein – they may also yield a more effective crisis response. During the 2022 energy shock, governments largely opted to subsidise demand with cheap borrowing, arguably the worst possible approach. This time, tighter fiscal limits could force more disciplined policymaking, enabling Europe to manage the necessary demand destruction to keep prices in check without squandering billions. See the original report from Nikolaus J. Kurmayer   here. Euractiv is a European news website focused on EU policies. It was founded in 1999 by the French media publisher Christophe Leclercq. The website's headquarters and central editorial staff are located in Brussels, with offices in Paris and Berlin.