US EditionPublished • loading... • Updated
Debt-burdened Europe has fewer options to buffer energy shock
European governments face fiscal limits amid weaker growth and higher deficits, with energy support likely capped at about 0.3% of economic output annually, Morgan Stanley said.
- Rising energy prices, up over 50% since the Middle East conflict began, are pressuring European governments to help households and businesses, but strained finances limit their fiscal firepower for broad subsidies.
- Morgan Stanley estimates European energy support capacity has plummeted from 3.6% of output in 2022 to around 0.3% annually under current European Union rules, as budget deficits sit nearly 3 percentage points higher than in 2019.
- Bond investors have become increasingly sensitive to fiscal slippage, discouraging aggressive spending. "I don't see any country being big on fiscal for the moment because they fear they will be punished," said Gregoire Pesques, Amundi's chief investment officer.
- France, Greece, and Poland have introduced oil price caps and discounts, while Germany seeks pump-price regulation. If the Strait of Hormuz remains closed, the European Union could allow temporary rule deviations permitting spending up to 0.6% of output.
- Bruegel senior fellow Georg Zachmann said the best option is to "enable and incentivize reductions in demand." Rating agencies Fitch and S&P warn high deficits could threaten credit ratings of France and Britain.
Insights by Ground AI
4 Articles
4 Articles
The explosion of energy prices, declared by the war between the US and Israel against Iran, puts European governments under pressure to help economies and firms, but the financial problems of some economies limit their responses, shows a...
·Romania
Read Full Article
Debt-burdened Europe has fewer options to buffer energy shock
The surge in energy prices triggered by the U.S.-Israeli war on Iran is putting European governments under pressure to help households and businesses, but strained finances in some major economies mean their firepower is limited.
·United Kingdom
Read Full ArticleCoverage Details
Total News Sources4
Leaning Left0Leaning Right0Center2Last UpdatedBias Distribution100% Center
Bias Distribution
- 100% of the sources are Center
100% Center
C 100%
Factuality
To view factuality data please Upgrade to Premium
