Brussels faces mounting pressure as IMF warns that most EU governments are flouting guidance to limit energy relief to the neediest households. Two-thirds of aid deployed across the bloc lacks targeting, risking political lock-in and heavier debt loads even as Middle East turmoil feeds price volatility. Removing pain at the pump now courts fiscal trouble later.

Borrowing costs for some Eurozone states have hit multiyear peaks amid anxiety that fresh shockwaves from oil markets could strain budgets already scarred by Covid and Russia’s invasion of Ukraine. Madrid will channel €3.5bn into VAT cuts while Berlin trims fuel taxes for all, moves that spread benefits broadly rather than concentrating help where need is acute. Italy, France, Belgium and Greece rank among the most indebted peers, leaving little margin for error.

Price caps and tax breaks mute signals that would push consumers toward alternatives, leaving demand elevated in tight markets and raising the odds of persistent outlays. More than 90 per cent of EU countries have deployed at least one distortion during this crisis, diluting incentives to adopt renewables or conserve. Europe risks trading short-term calm for long-term fiscal stress.