Debate: Keep the bills down: social and economic consequences of the war in Ukraine and the introduction of a windfall tax
Date: TUESDAY, 18 OCTOBER 2022
Speaker: Valdis Dombrovskis
Language: EN

Lower-income households are worst hit as they spend proportionately much more on food and energy. Businesses are also affected by rising energy costs, higher financing costs and lower consumer confidence. The current shock is very different from the COVID-19 pandemic, so our policies must be different too. There are three questions to ask at the moment: how to minimise the costs caused by this war; how to distribute those costs fairly and how to lay the ground for future prosperity. I will address each one in turn. First, we need to work on the root causes of inflation in the energy markets. This requires action to secure alternative sources of supply, to reduce our energy demand and to address the current situation in electricity and gas markets. The European Union has set up a platform for the joint purchase of gas, and we are increasing gas imports from reliable suppliers like Norway and the United States. Member States have agreed energy consumption reduction targets and exceptional measures while we prepare a broader review of the functioning of the electricity markets. The Commission will present this afternoon additional measures to address gas prices and guarantees of security of supply for next winter. And we are also mobilising additional financial resources for Member States to introduce REPowerEU chapters in the recovery and resilience plans.  Honourable Members, the more successful we are regarding energy, the stronger the economic and social position will be. Second, we must protect vulnerable households and businesses. It will not be possible to shield everyone from the economic consequences of the war. However, the public sector must protect those most exposed to high energy and food prices. Above all, this means providing income support to those whose purchasing power is most under threat and the worst-affected businesses. To achieve that, our support must be targeted, temporary and retain incentives to reduce energy consumption. A price cap on market revenues for infra-marginal producers and the solidarity levy for the fossil fuel sector will allow Member States to channel these revenues from the very large profits gained through unexpected circumstances towards those who need support the most. To provide generalised fiscal support would be not very helpful. It would fuel inflation, bring even higher energy prices, and potentially further weaken the economy. The European Central Bank is doing its job to contain inflation. The EU and the Member States need to do their job as well. Fiscal policy and monetary policy should not work at cross-purposes. This means providing effective support measures that are well-targeted and compatible with prudent fiscal policies that do not add to price pressures. Honourable Members, we also must look beyond this crisis. So, lastly, we must stay on course with the current policies to build a solid basis for Europe’s future prosperity. I am referring in particular to the reforms and investments agreed by some Member States in the recovery and resilience plans. Hundreds of billions of euros in grants will be disbursed to Member States over the next few years as a means of milestones and targets identified in their plans. And in the next months, we expect them to request EUR 225 billion in loans that remain available. To conclude, honourable Members, although this has been a brief overview, I hope I outlined many initiatives on the comprehensive approach that the Commission is applying to the current situation. Thank you, and I look forward to the first debate.