The energy crunch is a long-term issue that will increase public debt in Europe; render the continent less competitive and poorer. Dealing with this and rising inflation at the same time will lead to ructions that will cascade over the years.
Looking at how much higher energy expenses will be on projected gas prices is one approach to estimate the loss. Even if rates are at a level that prevents electricity companies from earning excessive profits, utilities analysts estimate that customers will spend 1. 3 trillion euros more in utility costs next year than they did this year.
Leaders in Europe will undoubtedly quicken the adoption of renewable energy, which is now a more attractive financial option. All this will erode Europe’s competitiveness.
While interest rates are increasing, Europe is already experiencing significant inflation. Governments must therefore borrow in order to assist society in getting through a crisis. But accruing more debt has a cost. Taxes must be raised, spending must be reduced, or the debt must be away at the expense of savers.