EU states running after policies to reduce energy inflation

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European countries may be reconsidering their support of Ukraine and sanctioning Russia as they are scrambling for strategies to stop the stream of energy inflation as a result of the situation in Ukraine, which has caused price increases, most notably for oil, which has risen beyond $100 per barrel.

Last week, former Texas industry regulator Ryan Sitton said the world community would require five to 10 years to match Russia's daily production of millions of barrels of oil, according to Sputnik.

Read more: US, EU sanctions on Russia impact gas, oil, currency & more

Europe is feeling the strain as food and energy prices rocket to multi-decade highs, and governments are considering what options they have to respond and right their wrongs.

The European Commission warned earlier this month that it may prolong a suspension of fiscal rigor rules until next year, as many EU member states requested a coordinated response to the Ukraine crisis' financial consequences, which follows the pandemic.

Crises, by country

Sweden, which has the highest gasoline prices in Europe, announced a temporary tax decrease as part of a $1.5 billion package of measures on Monday. 

Meanwhile, Belgium and the Netherlands have chosen to reduce VAT on fuel (natural gas, electricity, and heating), as well as gasoline.

Poorest households in Belgium will have a "social tariff" on electricity and natural gas.

The Polish government has expanded a set of policies enacted prior to the Ukraine crisis that was intended to operate as an inflation "shield". The Prime Minister asserted last weekend that "the fight against Putin brings costs." The question is, are European citizens willing to pay?

Five million people in Poland, which has taken in at least 1.8 million displaced Ukrainians, would also receive aid to help them cope with soaring food prices.

Despite the slew of promised initiatives, European countries will not seek to relax their fiscal belts excessively.

After releasing a 5.5-billion-euro package of relief measures in February, the Italian government stated at the start of March that it aims to "maintain a prudent budgetary policy."

In Germany, the government voted on Wednesday to quadruple public assistance for heating expenses, after earmarking a package of assistance for the most disadvantaged members of society last month. At the same time, Berlin committed to reinstating financial restraints beginning next year.

France, in introducing its own "resilience plan" on Wednesday, emphasized that the plan to lower gas costs at the pump, projected to cost 6.8 billion euros, was not a "whatever it costs" strategy.

Collective European solution

With the situation in certain nations becoming critical, French Finance Minister Bruno Le Maire earlier this month encouraged allies to come up with a "collective European solution."

Last week, there was panic in Hungary, when several stations ran out of fuel.

Slovenia, for its part, was challenged this week by an inflow of automobiles from neighboring Italy, which had come to stock up after the latter's government decided to restrict pricing.

In Spain, where prices are rising, the government has committed to take action after truckers complained that the rising cost of diesel was a "catastrophic" scenario.

Prime Minister Pedro Sanchez has conducted a series of visits to EU partners in the hope of reaching an agreement on a united approach to addressing the problem at a March 24-25 summit.

At the same time, Madrid has warned that if a unified deal does not materialize, it would take unilateral action.

Europe and repercussions

As the military operation in Ukraine intensifies, energy prices are soaring and shaking Europe's economic stability.

Policymakers are debating how to reduce inflation without jeopardizing economic recovery.

Christine Lagarde, the European Central Bank President, told reporters on Thursday that the war “will have a material impact on economic activity and inflation, through higher energy and commodity prices, the disruption of international commerce, and weaker confidence."

She added that the risks have greatly increased, while the bank tries to keep all its options open for the future.

Former US colonel and Eurasia Center Vice President, Earl Rasmussen, said that the European Union's latest sanctions and economic retaliation against Russia will backfire and cause a massive recession in Europe.