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Assessing the scope for compensatory fiscal measures in response to the recent energy shock

Author

Listed:
  • Bouabdallah, Othman
  • Checherita-Westphal, Cristina
  • Muggenthaler-Gerathewohl, Philip

Abstract

This box assesses the scope for euro area governments to adopt compensatory fiscal measures against the backdrop of the recent energy shock. It examines the available fiscal space, reviews the discretionary fiscal support provided so far, and assesses whether the current inflation environment has generated additional revenues that could partially finance current and future measures. The box concludes that, since fiscal space is more constrained than it was during the 2022 energy crisis and there is only modest scope for self-financing through inflation-driven revenues, it is all the more important for fiscal support to be temporary, targeted and tailored. JEL Classification: E32, C32, C5

Suggested Citation

  • Bouabdallah, Othman & Checherita-Westphal, Cristina & Muggenthaler-Gerathewohl, Philip, 2026. "Assessing the scope for compensatory fiscal measures in response to the recent energy shock," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2026:0005:8
    Note: 2679249
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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