9 April 2026 09:17 UTC · European Commission · EU Commission Press Release · Source · Email X Link

European Commission notes economic risks from energy shock

Key points

Risk of stagflation and weaker growth
Support must be temporary, targeted, and fiscally constrained

TL;DR

The war in the Middle East triggered large supply-chain disruptions and attacks on the Strait of Hormuz, causing a major surge in energy prices and global economic shockwaves, with brent crude trading below $100 per barrel after a temporary ceasefire.
The Commission's scenario analysis finds EU growth could be 0.2–0.4 percentage points lower and inflation up to 1 point higher under a short-lived disruption; larger, longer disruptions could lower growth 0.4–0.6 points and raise inflation 1.1–1.5 points in 2026–27.
The Commission will propose targeted measures: mandate lower electricity taxes, tax electricity less than fossil fuels, improve grid productivity, and modernise the Emissions Trading System including benchmark updates and increasing the Market Stability Reserve.
National support should allow automatic stabilisers, be temporary and targeted, have a clear end date, avoid increasing oil and gas demand, and keep net expenditure growth within Council-recommended limits; the new fiscal framework provides specified leeway and Belgium's 2026 draft budgetary plan was assessed compliant.

Original text

European Commission - Speech [Check Against Delivery] Remarks by Commissioner Dombrovskis at the dialogue on fiscal rules at the European Parliament's ECON Committee Brussels, 9 April 2026 Thank you Chair, honourable Members. Good morning everyone. It's good to return to this House for today's exchange. It comes at an opportune moment, when the resilience of the European economy is once again being tested. The war in the Middle East has triggered one of the largest supply-chain disruptions in the history of the global energy market. Attacks on the Strait of Hormuz and the targeting of energy infrastructure have resulted in a major surge in energy prices. And shockwaves from these disruptions are reverberating across the global economy. Of course, the full impact will depend on the duration, scope and intensity of the conflict. For now, the recently announced two-week ceasefire brings some much-needed de- escalation. This is reflected also in energy markets, with brent crude now trading below $100 per barrel. But the longer-term outlook still remains clouded by profound uncertainty. The European economy thus remains at risk of a stagflationary shock, as just mentioned. That is to say, a situation where slower growth coincides with higher inflation. The analysis undertaken by the Commission found that EU growth this year could be around 0.2-0.4 percentage points lower than projected in the Autumn Economic Forecast, under a short-lived disruption scenario. Inflation in this case could be up to 1 percentage point higher. If supply disruptions prove more substantial and longer-lasting, the negative consequences for growth could be even higher. The growth could be up to 0.4-0.6 points lower and inflation up to 1.1-1.5 points higher in both 2026 and 2027. Moreover, other channels could further amplify the negative economic impact I just outlined. It is worth noting that the figures I mentioned are not an economic forecast, but scenario analysis. The Commission's Economic Forecast will come mid-May, and will need to use some underlaying assumptions. At the meeting of the European Council last month, EU leaders called on the Commission to present a toolbox of targeted temporary measures to address higher energy prices. The Commission will present proposals to mandate lower tax rates on electricity, and to make sure that electricity is taxed less than fossil fuels, improve the productivity of grid infrastructure, and modernise the Emissions Trading System, including by updating the benchmarks for free allocations and increasing the firepower of the Market Stability Reserve to reduce price volatility. In this context it is important to recall that beyond managing the immediate energy crisis, our key priority is to structurally transition to an electrified economy, including by reducing the relative price of electricity compared to fossil fuels and by reinforcing grids. This is the only solution to permanently protect the EU from the volatility of fossil fuel prices and supply conditions. The Commission also stands ready to work closely with Member States to design policy measures at national level to mitigate the impact of higher energy prices. Here, it is important to note that the recent developments in energy prices and in the Middle East put additional stress on public finances. These stem not only from the deterioration of the economic outlook, but also from the costs associated with Member States' policy responses. It is crucial to keep in mind that our room for manoeuvre here is more limited than before previous shocks, given higher deficit and debt levels, a higher interest rate environment and also the urgent need for additional defence spending. National policy responses to protect our economy and people must align with certain key principles. First, automatic stabilisers would need to be allowed to operate to cushion the impacts on citizens and companies. And in fact our new fiscal framework has a number of inbuilt features that have the effect of cushioning this negative effect on the economy. First, as the framework is centred in the next expenditure benchmark, revenue shortfalls resulting from economic slowdown do not need to be compensated for. Second, increases in interest spending are not counted in the net expenditure benchmark. And thirdly, the cyclical component of unemployment benefit spendings is excluded from the benchmark. In a sense, this already provides for fiscal leeway, even before MS take discretionary fiscal measures. And then, if any additional support is envisaged, it should be temporary and targeted, have a clear end date, and not increase aggregate demand for oil and gas at a time when savings are needed. When designing policy measures, Member States should follow these principles and keep their net expenditure growth within the limits recommended by the Council, and the flexibilities provided within that. Looking backwards, we have been assessing our policy response also to previous crisis in 2022. Unfortunately, we have to note that policy responses from Member States were much less temporary and targeted than they should have been, correspondently coming with substantially higher fiscal costs – that is what we are emphasizing a lot. Turning briefly to the implementation of our economic governance framework. In December last year, I presented this Committee with the main elements of the European Semester Autumn package, including the Commission's Opinions on the draft budgetary plans for 2026 of euro area Member States. The only update since then is that we have since received Belgium's DBP 2026 and assess compliant with our fiscal rules. Overall, the Autumn Package shows that our new fiscal rules are working well. They are delivering on their promise to help strike the right balance between accommodating higher expenditure in new and urgent priorities, while preserving debt sustainability. Looking ahead, we will provide an updated assessment of the budgetary developments for all Member States as part of the 2026 European Semester Spring Package, which we are currently envisaging for early June I will stop here and look forward to your questions and comments. Thank you. SPEECH/26/788

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Valdis Dombrovskis

European Commission notes economic risks from energy shock

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