Europe

France is the last EU member to increase public spending in 2023

Governments across Europe are increasing public spending in their 2023 budgets to protect households and businesses from a looming recession.

France, which is suffering from a simultaneous hydro, nuclear and gas crisis, has increased public spending planned for 2023 by an additional 7.5 billion euros compared to the last draft in August.

In a copy project made public by the French website Context on Thursday September 22, 4.7 billion euros are reserved for green investments, including 2.6 billion euros intended for the renovation and insulation of housing and 1.3 billion euros for the acceleration of the electrification of cars and trucks.

The country has already spent an additional 71.3 billion euros to protect households and businesses from high energy prices this year. Its new budget also includes 250 million euros to encourage people to cycle more.

To pay for this, President Emmanuel Macron and Vice-President Élisabeth Borne plan to tighten unemployment benefits and raise the legal retirement age.

The increase in spending will first have to be approved by a hostile parliament that lacks a majority of 39 seats.

The European Central Bank’s decision to increase the cost of borrowing to bring down inflation is putting additional pressure on public finances.

Other EU governments also this week announced last-minute budget adjustments to allow for increased social support, in a bid to head off social unrest, which has been on the rise in Europe.

The loss of public trust was “worrying”, Dutch King Willem Alexander said in a speech on Tuesday (September 18th) by the country’s Prime Minister Mark Rutte in honor of the country’s annual budget day.

Just a day before, the Dutch government decided to cap energy bills for households and small businesses – a €16 billion move that Dutch bank ING called a “big bazooka”.

500 billion euros

From September 2021 to September 2022, EU governments, including the UK, have allocated €500 billion in energy support, according to data released Wednesday (September 21) by Brussels-based think tank Bruegel.

All this money has not yet been spent. Germany has allocated 100 billion euros to tackle energy inflation, but has so far only implemented plans worth 35 billion euros, with the rest yet to come. been spent.

The UK, where the new government has drawn up a plan to freeze household electricity spending at €2.723 a year, is set to spend €149.9 billion over the next 18 months, bringing full support into the country to 178.4 billion euros, according to Bruegel.

Simone Tagliapietra, author of the Bruegel study, writes that it is important to coordinate policies between European countries. “This level of intervention can deepen economic divergences within Europe,” he tweeted.

To help governments tackle excessive energy costs, the European Commission has announced a one-off tax and ‘solidarity contribution’ on fossil fuel companies that is supposed to transfer €140 billion from market winners to public coffers.

Energy ministers are expected to finalize a deal on Friday 30 September. Part of the discussion will focus on how to distribute these taxes proportionally among EU members.

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