European governments spend $278b to cushion energy crisis

Bloomberg

European governments have allocated about 280 billion euros ($278 billion) in funding to cushion the impact of the energy crisis on households and businesses.
The funding, calculated by Brussels-based Bruegel think tank, measures fresh allocations since September, and covers everything from subsidising tariffs for small businesses in Greece to direct payouts to consumers in Belgium. Some of the money hasn’t yet been spent.
“Prices will stay high throughout the winter and governments should work with the worst-case scenario assumption that they will not go away even after that,” said Giovanni Sgaravatti, an analyst at Bruegel. “Governments should focus on reducing energy demand where possible.”
Wholesale energy prices have soared to more than 10 times their seasonal average over the past five years as Russia squeezes natural gas flows to Europe. That’s hitting economic output across the continent, with heavy industry under pressure. Consumers are facing a cost-of-living crisis, with household bills in the UK set to triple.
The hit to governments comes as soaring inflation lowers living standards. UK inflation could pass 18% in January for the first time in half a century because of rocketing energy prices, Citigroup Inc. said this week.
“Europe’s policymakers have responded to the energy cost surge mostly with broad-based, price-suppressing measures, including subsidies, tax cuts and price controls,” IMF experts Olya Celasun, Dora Iakova and Ian Parry wrote this month, saying the measures delay the needed adjustment to conserve energy. “It keeps global energy demand and prices higher than they would otherwise be.”

Europe’s utilities seek
fresh debt
Utilities are leading a return of companies to Europe’s debt market as the region braces for a winter energy crunch.
Germany’s Eurogrid GmbH sold euro green bonds due in nine years, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The utilities sector has accounted for well over a third of August’s 6 billion euros ($6 billion) of non-financial bond issuance, according to data compiled by Bloomberg.
Eurogrid pulled in investor orders of over 6.5 billion euros for its 750 million euro deal, tightening the spread above mid-swaps by 35 basis points from initial marketing. It follows a 600 million-euros offering from E.ON SE and a 1.25 billion-euro sale from RWE AG last week. Both issuers trimmed the spreads offered on their deals by at least 20 basis points.
“There is an expectation that utilities will not be able to pass on all of the rising energy prices to consumers and consequently the funding needs and need for capital should increase,” said William Weaver, head of EMEA debt capital markets at Citigroup Inc. “On a standalone basis the credit metrics for the sector will be weakened by recent factors but the implicit state support is a mitigant.”
Energy firms are facing surging power prices as intense summer heatwaves increase electricity demand and cut production capabilities. This comes even before a potentially bleak winter, with expectations of a gas crunch causing energy shortages and deepening a consumer cost-of-living crisis.
The UK could face potential blackouts for industry and even households this winter, if the cold weather combines with gas shortages. Meanwhile, one in six households in the US have fallen behind on their utility bills as electricity costs skyrocket and threaten to plunge economy’s across the world in to recession.