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

Othman Bouabdallah, Cristina Checherita-Westphal and Philip Muggenthaler-Gerathewohl

Economic Bulletin Boxes, 2026, vol. 5

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

Keywords: fiscal policy; inflation; oil price shocks (search for similar items in EconPapers)
Date: 2026-08
Note: 2679249
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