The protracted energy crisis and geopolitical turmoil in the Middle East have put the European Union in a state of emergency, causing intense fiscal pressures and forcing governments to redesign safety nets for households and businesses.
With the additional cost of fossil fuel imports reaching 100 billion euros for the EU, states are led to various government interventions. According to the data collected by Fileleftheros, European measures mainly focus on reductions in indirect taxes, in order to reduce fuel prices and in some cases there is also an intervention for electricity prices. Some states are also taxing the excess profits of energy companies.
In this environment, European Union member states, led by Greece and Cyprus, are putting intense pressure on the European Commission to grant fiscal flexibility and derogations. The Commission appears cautious, as the European Fiscal Board (EFB) warns that energy crises should not be an excuse for fiscal relaxation. However, the pressure from member states is enormous, as energy costs are now openly affecting European competitiveness. The issue of fiscal derogations and common economic defense is expected to be the central topic of discussion at the EU Summit on October 15-16.
Interventions in Europe
• CYPRUS: Zero VAT on basic items for the whole of 2027 (fresh fruits, vegetables, milk, meat, fish and poultry, baby diapers, adult diapers and feminine hygiene items) has been announced. The measure is renewed and extended to bread, dairy, coffee, sugar and baby food.
Heating oil: Consumption tax is reduced from 7.4 to 2.1 cents/liter, from November 1, 2026 to April 30, 2027. Finance Minister Makis Keravnos said that a derogation has already been requested by the European Commission to consider the possibility of an even greater reduction in the relevant tax. He has expressed concern about the constraints placed by the European Union's new economic governance framework on spending increases, noting that countries such as Cyprus, which have strong fiscal performance and low debt, should have more flexibility for support measures in times of crisis
Electricity: The subsidy for vulnerable consumers (category 08) and commercial use (category 10) is renewed for the whole of 2027. 23,300 households with 100% coverage of the increase and about 82,500 businesses with a subsidy of up to 85% benefit.
For photovoltaics, VAT for residential consumers is reduced from 19% to 9%, with immediate effect. Emergency support of €200: Paid in a lump sum to 53,511 vulnerable beneficiaries. Support allowance for residents of mountainous areas, from which 10,500 households and 24,000 beneficiaries will benefit.
-GREECE: The Greek government is trying to balance between direct subsidies and long-term price reductions. Prime Minister Kyriakos Mitsotakis sent a letter to Ursula von der Leyen, requesting that temporary support measures for states be exempted from the EU's strict fiscal calculations. For heating oil, a double subsidy (state and refineries) is activated, so that the starting price on October 15 can be kept below €1.75 per liter. For the subsidy on diesel, the state aid is increased to 15 cents per liter (from 10 cents) for the period 1-15 October. Combined with the refinery discounts, the total relief at the pump reaches 20 cents per liter (dropping the price to close to €2 from the €2.22 it had reached).
• GERMANY: The federal government and the states have agreed to proceed with a new package of measures aimed at reducing fuel prices. In this context, a reduction in taxation on gasoline and diesel by 17 cents per liter, including VAT, was announced from October 1. The fiscal cost is estimated at €2.5 billion, with the German Ministry of Finance considering covering it through the taxation of the super profits of energy companies.
• FRANCE: With inflation at 3% and food prices jumping 9.9%, Paris allocated €450 million for fuel allowances (€100) to long-distance workers, as well as energy vouchers to 5.5 million vulnerable households. The measures also include a subsidy of 15 cents per liter for diesel used by farmers.
• SPAIN: It maintains the cap on the price of natural gas used to produce electricity, keeping bills lower than the European average. At the same time, it renewed subsidies on public transport tickets (free suburban trains) to prevent the use of cars.
• PORTUGAL: Combines the reduction of VAT on electricity with direct aid to farmers and small and medium-sized enterprises to absorb the cost of fertilizers and fuel.
• ITALY: It is one of the first countries to take advantage of the EU's fiscal flexibility capabilities, drastically reducing consumption taxes on electricity for industry and households. By the end of the year, the country's program for compensation of agricultural businesses due to the increased cost of fuel and fertilizers, as well as fishing and aquaculture businesses due to increased fuel costs, will apply.
• DENMARK and SWEDEN: They face the highest diesel prices in the EU (over €2.50/litre). Instead of horizontal tax reductions, they choose to boost targeted heating allowances for low-income citizens and accelerate investments in green electricity.
• FINLAND: Implements temporary tax deductions for workers' travel expenses and increased allowances for agricultural businesses.
• POLAND and CZECH REPUBLIC: They have introduced caps on electricity and gas prices for household consumers, while providing state guarantees to energy-intensive industries to avoid lockdowns. Poland has imposed a 60% tax on excess revenues that oil companies will have in March and December 2026.
• HUNGARY: The government will grant €60 a month to drivers until the end of the year in order to limit the impact of soaring fuel prices. The aid concerns the owners of about one million diesel cars.
• BULGARIA and ROMANIA: They focus on direct compensation on electricity bills, which are financed directly by the taxation of the super profits of energy production companies.
Malta's reaction to the increases
In Malta, the government continues to fully absorb international increases, keeping electricity and fuel prices frozen through direct state subsidies to the national energy provider.
The Baltic countries (Estonia, Latvia, Lithuania), due to high inflation, apply automatic subsidies to bills when energy prices exceed a certain safety threshold.
European Commission: Limit energy consumption
The European Commission has issued a warning to the governments of the member states of the need to limit energy consumption, as natural gas reserves remain "extremely low" and the rise in global demand may further increase pressures on the European market.
The issue of energy sufficiency in winter was also discussed at the informal Meeting of EU Energy Ministers, on Tuesday, September 29, in Dublin. EU Energy Commissioner Dan Jorgensen, in a letter to European capitals, calls on governments to continue taking measures that boost supplies or limit gas and electricity demand "for as long as necessary".
The Commission's recommendations, although currently under the guise of voluntary adjustment, lay the groundwork for what may follow in the near future. It examines measures that were used during the 2022 energy crisis, but does not propose the imposition of mandatory restrictions.
