Brussels responds to governments that ask to tax the extraordinary earnings of power corporations: “Nothing prevents it” | Economy | EUROtoday

Governments that need can now tax the extraordinary earnings of power corporations pushed by the Middle East struggle and rising costs. “Nothing prevents Member States from applying this tax,” confused Valdis Dombrovskis, Commissioner for Economy and Finance, within the European Parliament this Thursday. It responded to the request of a number of governments, together with the Spanish one, to Brussels to think about this measure within the vary of response choices that the EU Executive has been making ready for weeks and has not but seen the sunshine of day. What the Commission will not be considering for now’s suspending the fiscal guidelines that may give governments room to resort to public spending with out worry of sanctions for extreme deficits.

“Several countries have sent a letter to the Commission asking [que recoja] this measure. We already proposed a tax like this during the last crisis,” Dombrovskis admitted when responding to parliamentarians about what the position was on the claim by Spain, Germany, Austria, Italy and Portugal to recommend a special rate on the extraordinary profits of energy companies. He then reminded these countries that to take this step they do not need the encouragement of the Commission, that they can take the step if they wish because “it is a direct tax and it is the responsibility of the Member States.”

These words do not mean that the EU Executive is not going to include it in the range of recommendations that it has been developing for weeks – the European Council on March 19 already requested these options from the Commission – because its intention is that this park of advice serves to coordinate the response at the European level. “We are currently studying it. It was a response in previous crises and that possibility remains now,” explained Dombrovskis.

With his usual monotone tone, the Latvian commissioner stressed in the European Parliament that “the European economy remains at risk of a stagflation crisis, that is, a situation in which low growth and high inflation coincide.” This is what was seen in 2022 and 2023, when Russia invaded Ukraine and the availability of pure fuel to Europe was put in danger, inflicting costs to skyrocket. That prompted the European Central Bank to reply with a speedy improve in rates of interest to regulate inflation. Frankfurt achieved its goal however the European economic system stays stagnant – its lack of competitiveness additionally helps to clarify its anemic state lately.

And just when the European economy has barely begun to gain traction, this blow has come and slows it down. As Standard & Poor’s leading indicators, the so-called PMI, pointed out this week, the effects are already being seen. After months of rising, these advanced indicators that try to anticipate what is going to happen in the economy with surveys and company order data have fallen. In fact, its chief economist, Chris Williamson, spoke a few weeks ago about the risk of stagflation that Dombrovskis also points out.

But this is not going to soften the Commission for the moment, which is firm to the requests coming from Italy, mainly from the League, one of the partners of the Government of Giorgia Meloni, to activate the escape clause that allows the suspension of fiscal rules and gives the States room to respond with public spending to crises. “The clause requires a severe decline within the economic system within the euro zone or within the European Union as an entire. We should not at the moment in that state of affairs. The indicators present a slowdown, however not a extreme decline. Obviously, we are going to proceed to watch the state of affairs.”

The option to which the Latvian politician is open is to lower taxes, although he sets limits. “We are not opposed to Member States lowering energy taxation,” he stated, following the line that other members of the Commission have pointed out, such as the president herself, Ursula von der Leyen. But he then recalled that the tax cuts “should not a selective measure, however a brief measure, and the fiscal value should be fastidiously monitored.”

This will not be the primary time that Dombrovskis has confused the significance of maintaining in thoughts the fee to the general public coffers of the response that Member States give to this disaster. Already initially of final week he recalled that the EU and its part nations have much less room to reply this time than on earlier events, exactly as a result of already then (monetary disaster, pandemic and inflation following the invasion of Ukraine by Russia.