Eight European Union States Face Debt Caps as Energy Prices Rise 50 per cent

Oil prices have risen 50% since February. Eight EU governments, Malta among them, are under binding limits on public spending. The EU budget rulebook has a special escape route for defence spending, but not for energy bills. The Hormuz crisis has exposed the weakness in that design: Europe planned for one kind of emergency and was hit by another.

EU governments have committed roughly €11 billion in energy support since the Strait of Hormuz closed in late February. During the 2022 Russian gas crisis, they spent more than €700 billion (Bruegel). The difference is not only political caution. It is a legal constraint built into the EU's fiscal system.

Defence gets flexibility, energy does not

Last year, 17 EU countries activated the National Escape Clause, a provision in the reformed Stability and Growth Pact, the EU's budget rulebook. It allows governments to go beyond normal deficit limits for defence spending, up to 1.5% of GDP annually (Council of the EU). Italy's Prime Minister Giorgia Meloni now wants the same room for energy measures. In a letter to Commission President Ursula von der Leyen on 17 May, she asked for the clause to cover "extraordinary measures necessary to confront the energy crisis" (Il Fatto Quotidiano, Open.online).

Brussels said no. Commission spokesperson Olof Gill said the escape clause is "not among the options" being considered (Open.online). The Dutch finance minister put it more sharply: "The response to shocks cannot be more debt" (EUNews.it). The legal point is narrow but decisive. The clause covers only defence. Extending it to energy would need a new regulation, and the frugal bloc, led by Germany, the Netherlands and Austria, can block the politics in Council.

Who can spend, who cannot

Eight countries are under Excessive Deficit Procedures, the EU process used when a state runs a deficit above 3% of GDP. France, Italy, Belgium, Poland, Romania, Slovakia, Malta and Finland all face binding spending ceilings (Council of the EU). France's ceiling allows only +1.2% nominal spending growth in 2026, meaning growth before inflation is taken into account, while its deficit is close to 5% of GDP (Le Monde). If inflation is higher than 1.2%, that ceiling means cuts in real terms.

The result is an uneven European response. France is spending €180 million per month on fuel rebates that are properly targeted: a €50 flat monthly payment for drivers earning under €17,000 a year who commute at least 15 kilometres to work (Le Figaro, Info.fr). Germany has used a much broader tool: a 17-cent fuel tax cut until June, costing €1.6 billion, with monitoring showing that only around 11 cents reached consumers in the first weeks (Bundesregierung, Stern). Italy's fuel excise cut costs about €1 billion monthly, but expires on 22 May and has no confirmed extension (Autoblog.it, Contropiano).

Spain, which is not under an Excessive Deficit Procedure, accounts for almost half of all EU energy spending. The countries under fiscal surveillance are spending the least. That includes Malta, where the EU's fiscal rules are no longer an argument in Brussels but a constraint on domestic room for manoeuvre.

The wrong households get the money

France's targeted rebates are the exception. More than 72% of EU energy support measures are untargeted VAT or excise cuts, applied across the board and giving the same benefit per litre consumed (Bruegel). Wealthier households drive more and consume more energy in absolute terms, so these measures send more euros to people who need them less. The OECD's post-mortem on the 2022 crisis found the same pattern: nearly 80% of support reached all consumers, regardless of income.

The pressure is heaviest at the bottom. The lowest-income French households spend up to 12.7% of their budget on fuel (Transport & Environment). Across the EU, rural households with no public transport alternative spend around 7% of their budget on energy alone (JRC). In the Netherlands, diesel prices are up 58% year-on-year, and the IMF has cut the country's growth forecast from 1.2% to 1.0% (IMF/Welingelichtekringen).

The governor of the Bank of France summed up the bind in five words: "We no longer have money" (Le Figaro). Europe created budget flexibility for military threats, then faced an energy shock for which that flexibility does not apply. The strait remains closed. The rules remain tight. The households carrying the cost are the ones with the least capacity to absorb it.