The Fitch Greece warns that Greece is implementing targeted energy measures, which limit fiscal costs but require caution on potential expansion.

In a period of intense uncertainty for European economies, Greece is emerging as a typical case of more restrained and targeted fiscal intervention in the face of the energy crisis. According to Fitch, the approach taken differs from the more horizontal policies of other countries, limiting for now the immediate fiscal burden but leaving open the possibility of future pressures on the budget if stimulus measures are expanded or made permanent.

European governments have so far announced limited support measures to address high energy prices, but Fitch warns that their expansion could have medium-term consequences on public finance.

The implementation of the measures

More specifically, according to a senior analyst at Fitch Ratings, horizontal interventions by European governments to protect households and businesses from high energy prices could have a significant impact on their public finances if they are extended.

So far, European governments have announced significantly smaller support packages in the wake of the war with Iran, compared with those adopted after the Russian invasion of Ukraine in 2022, Reuters reports.

However, they have focused on measures of universal application, such as fuel tax cuts, while economists have warned that they should focus on targeted measures – such as those for lower-income households – given their already strained budgets.

Greece the only one with targeted measures, according to Fitch

Federico Bariga-Salasar, head of Western European sovereign ratings at Fitch, said in a webinar that measures so far have been “very small”, ranging from 0.3 percent of GDP in Spain to less than 0.01 percent of GDP in France and Britain, reflecting tighter budgets in the latter two countries.

He said uncertainties around energy developments may lead some countries to take additional support measures in the future.

“Unfortunately, so far, most of these (measures) have been untargeted. The only country that has really implemented targeted measures is Greece,” Bariga-Salasar said.

“This could of course have a significant impact on public finances in the medium term if the scope of these measures increases.”