Assessing public measures in the face of inflation and the Ukrainian crisis
Funcas (the Spanish economic Think Tank) reviews the public measures of the main EU countries (Spain, France, Germany and Italy) to face the exponential increase in energy prices after the invasion of Ukraine. The application of tax reductions on energy, the application of subsidies to fuel consumption, or the reforms of the electricity price formation mechanism, when applied across the board, although they may be solution in the short term, they have a high budgetary cost and raise doubts about their effectiveness in the long term, while exacerbating the tension between the containment of inflation and the change of energy model.
- In the long term, most of the measures implemented in the four countries have no effect on the fight against inflation, with exceptions such as energy saving and efficiency measures (Germany has reduced public transport fares and Italy will make it compulsory to keep air conditioning above 25 degrees Celsius next summer).
- Compensation policies focused on the most vulnerable sectors are undoubtedly the most effective from the point of view of protecting the productive sector and social cohesion; but they do not have a direct impact on inflation, nor do they encourage structural adjustment.