In Europe, the energy crisis leads to growing budget cuts

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In the midst of a total energy crisis, Europe is taking more measures to reduce its consumption.

What this means: The impact of Russia’s war in Ukraine – and the combination of sanctions and embargoes severely limiting the supply of Russian gas – is beginning to have real effects on the standard (and cost) of living of the West.

Big picture: At the end of July, the 27 Member States of the European Union agreed to voluntarily reduce their gas consumption by 15% between August and March 2023.

  • Under the deal, mandatory cuts could be imposed if the energy supply situation deteriorates.

What is happening: A range of government imposed restrictions, similar to the wartime type of restrictions, here is a sample.

In Germany:

  • The magnificent Cologne Cathedral – normally lit all night – is now dark at night. Public buildings, museums and other monuments, such as the Brandenburg Gate in Berlin, will also no longer be illuminated overnight.
  • In Hannover last month, hot water was cut off in public buildings as the city sought to cut consumption by 15%.
  • The southern city of Augsburg has decided to turn off the traffic lights.

Spain:

  • Congress agreed to temperature limitations – air conditioning should be no lower than 27 degrees Celsius, or nearly 81 degrees Fahrenheit.
  • After 10:00 p.m., shop windows and unoccupied public buildings will no longer be lit.

Italy:

  • Air conditioning in schools and public buildings has already been restricted in what the government has called “Operation Thermostat”, starting in May.
  • Italy is one of the European countries most dependent on Russian energy.

France:

  • While approximately 70% of its energy comes from nuclear power, France has also committed to reducing its consumption of natural gas.
  • Shopkeepers will now be fined for keeping doors open and air conditioning running, a common practice.
  • Illuminated signs will be prohibited between 1 a.m. and 6 a.m.

What we are looking at: If the discomfort of the energy crisis – which could worsen during the winter – reduces public and political support for sanctions against Russia in response to its brutal invasion of a small neighbor.

  • Analysts say Vladimir Putin hopes the pressure of the energy crisis could divide European nations, weakening his unified response to the war in Ukraine. This could help Russia evade some painful sanctions.

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