European governments are rolling out tax cuts, subsidies and other relief measures as the prolonged energy crisis and geopolitical turmoil in the Middle East add to pressure on households, businesses and national budgets.
The additional cost of EU fossil fuel imports is estimated at around €100 billion, according to figures compiled by Phileleftheros, prompting governments to intervene mainly through cuts in indirect taxes aimed at reducing fuel prices.
Some countries are also acting on electricity prices, while others have introduced or are considering taxes on excess profits in the energy sector.
Against this backdrop, a group of EU member states led by Greece, with Cyprus also pressing the issue, is calling on the European Commission for greater fiscal flexibility and exemptions that would give governments more room to finance support measures.
The debate comes as energy costs increasingly weigh on European competitiveness.
The Commission has already opened the door to limited fiscal flexibility for expenditure aimed at improving energy resilience and reducing dependence on imported fossil fuels, subject to specific limits and conditions under the EU’s fiscal framework.
The issue of further fiscal flexibility and a coordinated economic response is expected to feature prominently at the EU summit on 15-16 October.
How European countries are responding
Cyprus: The government has extended zero VAT on a range of essential goods and introduced further measures to ease pressure on households and businesses.
Zero VAT will continue throughout 2027 on fresh fruit and vegetables, milk, baby and adult nappies and feminine hygiene products.
A separate zero-VAT measure covering meat, fish and poultry has been extended to include bread, dairy products, coffee, sugar and baby food from 12 October 2026 until 31 May 2027.
Excise duty on heating oil will fall from 7.4 cents to 2.1 cents per litre from 1 November 2026 until 30 April 2027.
Finance Minister Makis Keravnos has also said Cyprus has sought scope from the European Commission to examine whether the tax could be reduced further. He has argued that countries with strong fiscal performance and low debt should have greater flexibility to support their economies during crises.
Electricity subsidies for vulnerable consumers under tariff category 08 and commercial users under category 10 will continue throughout 2027. The scheme covers 100% of the increase for 23,300 households, while around 82,500 businesses can receive subsidies of up to 85%.
VAT on residential photovoltaic systems is being reduced from 19% to 9%.
The government has also announced a one-off €200 payment for 53,511 vulnerable recipients, while enhanced support for mountain communities will benefit 10,500 households and around 24,000 people.
Greece: Athens is combining direct subsidies with measures aimed at limiting retail fuel prices.
Prime Minister Kyriakos Mitsotakis has written to European Commission President Ursula von der Leyen seeking greater flexibility for temporary government support measures under EU fiscal rules.
Heating oil will receive support from both the government and refineries, with the aim of keeping its starting price below €1.75 per litre from 15 October.
The state subsidy on road diesel has also been raised to 15 cents per litre from 10 cents for 1-15 October. Combined with refinery discounts, the total reduction at the pump reaches around 20 cents per litre.
Germany: The federal government and the Länder have agreed a package aimed at lowering fuel prices.
Taxes on petrol and diesel have been cut by 17 cents per litre, including VAT, from 1 October. The fiscal cost is estimated at €2.5 billion, with the Finance Ministry examining whether some of the cost could be covered by taxing excess profits in the energy sector.
France: With inflation at 3% and food prices up 9.9%, Paris has allocated €450 million for fuel payments of €100 to workers travelling long distances and energy vouchers for 5.5 million vulnerable households.
Measures also include a 15-cent-per-litre subsidy for diesel used by farmers.
Spain: Madrid is maintaining a cap on the price of natural gas used to generate electricity in an effort to contain power bills.
Public transport subsidies have also been extended, including free commuter rail travel, as part of efforts to reduce car use.
Portugal: The government is combining lower VAT on electricity with direct support for farmers and small and medium-sized businesses facing higher fertiliser and fuel costs.
Italy: Rome has made use of EU fiscal flexibility to cut energy taxes for industry and households.
Its support programme for agricultural businesses affected by higher fuel and fertiliser costs, as well as fishing and aquaculture companies facing higher fuel bills, will remain in force until the end of the year.
Denmark and Sweden: With diesel prices above €2.50 per litre, among the highest in the EU, the two countries have avoided broad-based tax cuts and instead focused on targeted heating support for lower-income households and faster investment in green electricity.
Finland: Helsinki has introduced temporary tax deductions for workers’ travel costs and increased support for agricultural businesses.
Poland and Czechia: Both countries have imposed caps on electricity and natural gas prices for households while providing state guarantees to energy-intensive industries.
Poland has also imposed a 60% tax on excess revenues earned by oil companies between March and December 2026.
Hungary: The government will provide drivers with €60 a month until the end of the year to offset higher fuel prices. The measure covers owners of around one million diesel vehicles.
Bulgaria and Romania: Both are focusing on direct compensation through electricity bills, financed by taxes on excess profits earned by power producers.
Malta keeps energy and fuel prices frozen
Malta continues to absorb international price increases through direct state subsidies to the national energy provider, keeping electricity and fuel prices frozen.
The Baltic states — Estonia, Latvia and Lithuania — are using automatic bill subsidies when energy prices exceed specified thresholds, against a backdrop of high inflation.
Commission urges governments to curb energy use
The European Commission has also urged governments to continue measures that either strengthen supply or reduce demand for gas and electricity as concerns grow over energy availability during the winter.
EU energy ministers discussed winter supply at their informal meeting in Dublin on 29 September.
EU Energy Commissioner Dan Jørgensen has urged European capitals to maintain measures that strengthen supply or limit gas and electricity demand for as long as necessary.
For now, the Commission is focusing on voluntary adjustments rather than mandatory restrictions.
However, measures used during the 2022 energy crisis are again being examined as Europe prepares for the possibility of continued pressure on energy supplies and prices.
