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UKRAINE

Russia further reduces gas supplies to Austria

Austria's OMV said Monday that Gazprom was further reducing the supply of gas, as the Russian giant began 10 days of routine maintenance on its Nord Stream 1 pipeline.

Russia further reduces gas supplies to Austria
Picture taken on May 3, 2022 shows a general view of the largest Austrian refinery OMV at Schwechat near Vienna, Austria. (Photo by JOE KLAMAR / AFP)

“OMV has been informed by Gazprom about a reduction in the gas supply. This means for today a reduction of about 70 percent of the amount that arrives at the Baumgarten natural gas hub” near the Slovak border, the group said in a statement emailed to AFP.

Austria’s state-run gas company OMV currently receives around 70 percent less than the contracted amount, the firm’s spokesman Andreas Rinofner told Austrian media. Since mid-June, the Russian gas giant had delivered about half of the ordered quantity.

Rinofner says that the issue of whether Austria’s storage tanks can be filled despite the supply problems depends on the daily consumption and purchase on the spot markets.

Austria has been looking for alternative sources of the much-needed gas, which the alpine country depends on for much of its heating and industry needs.

As an “emergency measure”, Austria is getting ready to reopen a coal-fuelled power station near Graz amid fears there will be disruptions to the gas supply from Russia this winter, as reported.

READ ALSO: How to keep your apartment cool in Austria this summer amid rising energy prices

Austria’s emergency plan

Austria is currently with an early warning level for its gas emergency plan, as The Local reported. This level is reached if there are concrete and reliable indications that the gas supply could deteriorate. But there is no immediate impact on average Austrians.

The alert system was activated back in March, following Russia’s announcement that gas deliveries would only be paid for with rubles, the Russian currency. Kremlin’s threat did not come to fruition, but Moscow has slowly decreased the amount of natural gas it sends to European countries.

The Austrian government has accused the Vladimir Putin administration of “weaponising” energy.

Austria sources 80 percent of its gas from Russia, so the country would be seriously impacted if supplies were disrupted due to the war in Ukraine, a breakdown of diplomatic relations or any other unforeseen event.

READ ALSO: REVEALED: What is Austria’s emergency plan if Russia cuts gas supply?

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ENERGY

How European countries are spending billions on easing energy crisis

European governments are announcing emergency measures on a near-weekly basis to protect households and businesses from the energy crisis stemming from Russia's war in Ukraine.

How European countries are spending billions on easing energy crisis

Hundreds of billions of euros and counting have been shelled out since Russia invaded its pro-EU neighbour in late February.

Governments have gone all out: from capping gas and electricity prices to rescuing struggling energy companies and providing direct aid to households to fill up their cars.

The public spending has continued, even though European Union countries had accumulated mountains of new debt to save their economies during the Covid pandemic in 2020.

But some leaders have taken pride at their use of the public purse to battle this new crisis, which has sent inflation soaring, raised the cost of living and sparked fears of recession.

After announcing €14billion in new measures last week, Italian Prime Minister Mario Draghi boasted the latest spending put Italy, “among the countries that have spent the most in Europe”.

The Bruegel institute, a Brussels-based think tank that is tracking energy crisis spending by EU governments, ranks Italy as the second-biggest spender in Europe, after Germany.

READ ALSO How EU countries aim to cut energy bills and avoid blackouts this winter

Rome has allocated €59.2billion since September 2021 to shield households and businesses from the rising energy prices, accounting for 3.3 percent of its gross domestic product.

Germany tops the list with €100.2billion, or 2.8 percent of its GDP, as the country was hit hard by its reliance on Russian gas supplies, which have dwindled in suspected retaliation over Western sanctions against Moscow for the war.

On Wednesday, Germany announced the nationalisation of troubled gas giant Uniper.

France, which shielded consumers from gas and electricity price rises early, ranks third with €53.6billion euros allocated so far, representing 2.2 percent of its GDP.

Spending to continue rising
EU countries have now put up €314billion so far since September 2021, according to Bruegel.

“This number is set to increase as energy prices remain elevated,” Simone Tagliapietra, a senior fellow at Bruegel, told AFP.

The energy bills of a typical European family could reach €500 per month early next year, compared to €160 in 2021, according to US investment bank Goldman Sachs.

The measures to help consumers have ranged from a special tax on excess profits in Italy, to the energy price freeze in France, and subsidies public transport in Germany.

But the spending follows a pandemic response that increased public debt, which in the first quarter accounted for 189 percent of Greece’s GDP, 153 percent in Italy, 127 percent in Portugal, 118 percent in Spain and 114 percent in France.

“Initially designed as a temporary response to what was supposed to be a temporary problem, these measures have ballooned and become structural,” Tagliapietra said.

“This is clearly not sustainable from a public finance perspective. It is important that governments make an effort to focus this action on the most vulnerable households and businesses as much as possible.”

Budget reform
The higher spending comes as borrowing costs are rising. The European Central Bank hiked its rate for the first time in more than a decade in July to combat runaway inflation, which has been fuelled by soaring energy prices.

The yield on 10-year French sovereign bonds reached an eight-year high of 2.5 percent on Tuesday, while Germany now pays 1.8 percent interest after boasting a negative rate at the start of the year.

The rate charged to Italy has quadrupled from one percent earlier this year to four percent now, reviving the spectre of the debt crisis that threatened the eurozone a decade ago.

“It is critical to avoid debt crises that could have large destabilising effects and put the EU itself at risk,” the International Monetary Fund warned in a recent blog calling for reforms to budget rules.

The EU has suspended until 2023 rules that limit the public deficit of countries to three percent of GDP and debt to 60 percent.

The European Commission plans to present next month proposals to reform the 27-nation bloc’s budget rules, which have been shattered by the crises.

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