The war escalation produced by the Third Gulf War has caused a crisis in the price of energy that inevitably evokes the ghosts of what was experienced after the Russian invasion of Ukraine four years ago. Faced with this scenario, five heavyweights of the European Union have decided to step forward to prevent history from hitting them again.
In short. On April 3, the economy ministers of Spain, Germany, Italy, Austria and Portugal sent a formal letter to the European Commissioner for Climate Action, Wopke Hoekstra. The request, advanced on social networks by the Spanish vice president Carlos Body, is direct: they demand exploring “an instrument of temporary solidarity so that energy companies contribute with the extraordinary profits obtained during the war.”
A double reading. The movement of this block of five countries is understood from two positions: economic and political. On the one hand, they seek to protect the citizen’s pocket and public coffers. to alleviate the cost of the crisis and curb inflation falls on business margins and not exclusively on “consumers (…) without overloading public budgets,” as the original letter states.
On the other hand, from a political focus, the letter seek to send a message of unity. The measure would demonstrate to citizens that Europe is “united” and capable of “acting.” Furthermore, he sends a serious warning to the market: “those who benefit from the consequences of war must do their bit to alleviate the burden that falls on the population.”
The mirror of 2022. To speed up procedures and avoid legal labyrinths, the five ministers propose using a formula that has already proven effective. The proposal is based in resurrecting Regulation (EU) 2022/1854the same emergency tool that was activated in the Ukrainian crisis. The signatories maintain that this precedent provides the tax with the “solid legal basis” that is necessary to act immediately before the current market volatility.
However, as might be expected, it will not be an exact copy. There is a technical nuance to take into account: Spain and its allies have asked the Commission to study “if and how” the profits that these oil multinationals obtain abroad can also be taxed. This would allow for more targeted and effective taxation on surpluses generated globally. Despite the intentions, the fine print still needs to be outlined. The text sent to Brussels is still a declaration of intentions that “does not offer details on what percentage should be applied to extraordinary profits or on which companies said tax would fall.”
While Europe decides, Spain assumes the bill. In parallel to this European debate, the Spanish Executive has already deployed a shock package that reduces VAT on fuel from 21% to 10% and reduces the special tax on hydrocarbons. The results are tangible: the price of gasoline has dropped to 1,557 euros per liter and the March CPI has been cushioned to 3.3%. However, the bill for this “relief” at the pumps costs the State coffers 5,000 million euros. Precisely, the budgetary pressure that the new European tax seeks to alleviate.
The ball, on Brus’ roofandthe. The letter is already on the table of the European Commission. The main demand of those responsible for the economy of Spain, Germany, Italy, Austria and Portugal is that this measure be addressed “as quickly as possible.”
Now the diplomatic and technical countdown begins. The barrel of crude oil maintains its upward trend due to instability in global supply routes, which is why technical services in Brussels are expected to evaluate the legal basis of this possible instrument in the coming weeks. Europe faces the challenge of demonstrating whether its fiscal reflexes remain as sharp as in 2022.
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