Broad energy subsidies could push prices higher instead of protecting consumers, the European Commission warned on Thursday. Eurozone finance ministers backed targeted help instead as rising fuel costs and more expensive borrowing squeeze governments’ ability to respond.

“Broad measures would not only be fiscally too costly, they would also drive up energy demand and prices and thus fail to help those in need,” Economy Commissioner Valdis Dombrovskis said after a Eurogroup meeting in Luxembourg. He warned that price pressures could continue into winter.

The warning comes as Europe enters winter with gas storage only 72% full, according to a report published on Thursday by European gas network operators. They said infrastructure could meet demand, but sustained deliveries of liquefied natural gas would be important to compensate for historically low reserves.

A smaller shock, but less room to respond

“Compared to 2022, the shock is smaller, but fiscal space is more constrained and interest expenditure is rising,” Pierre Gramegna, managing director of the European Stability Mechanism, said at the press conference. Governments are facing higher energy costs while also increasing defence spending and paying more to service their debt.

Eurogroup President Kyriakos Pierrakakis said energy prices had risen to elevated levels since late August, including diesel and jet fuel. The pressure extends beyond winter heating, affecting transport, businesses and household spending across Europe. Ministers reaffirmed that relief should be temporary, targeted and tailored to those most in need.

Broad measures would not only be fiscally too costly, they would also drive up energy demand and prices and thus fail to help those in need.
— Valdis Dombrovskis, Economy Commissioner

The gas operators’ report warned that, if LNG deliveries remain limited, reserves could fall below 30% by the end of winter. That would increase Europe’s vulnerability to late cold spells and make refilling storage the following summer harder. Landlocked countries in Central and Eastern Europe face particular difficulties in securing sufficient LNG supplies.

Dombrovskis argued that reducing dependence on fossil fuels was the only lasting solution. Pierrakakis called for more clean energy, electrification, stronger grids and connections between countries. “These infrastructures take time to build. That is precisely why decisions cannot wait,” he said.

Greece and Italy seek more room to fund relief

Greece and Italy are pressing for additional flexibility under EU budget rules to respond to rising energy costs. Pierrakakis said some ministers supported their proposals while others had reservations. The dispute centres on how much fiscal room governments should have to finance relief while keeping debt and borrowing costs under control.

Dombrovskis said the Commission had already positively assessed both countries’ requests to use existing flexibility for energy-security measures. The EU has widened an exception originally intended for defence spending to cover certain investments that reduce dependence on imported fossil fuels. The arrangements allow eligible energy spending of up to 0.3% of GDP annually, with a cumulative limit of 0.6% over 2026–28.

We cannot come with new fiscal flexibilities all the time.
— Valdis Dombrovskis, Economy Commissioner

That allowance is separate from the additional flexibility Greece and Italy are now seeking.

“We cannot come with new fiscal flexibilities all the time,” Dombrovskis said, warning that repeated exceptions could weaken confidence in the rules. Asked whether he was rejecting the two countries’ requests outright, however, he said the Commission would examine them more closely. Thursday’s meeting produced no agreement on additional flexibility, and Pierrakakis said the discussion would also move to EU leaders.

“The answer cannot simply be more borrowing, nor can it be across the board spending cuts that weaken essential public services,” Pierrakakis said. Governments now have to decide how much immediate relief they can afford while protecting investment in cheaper, more secure energy. Their forthcoming budget plans will show whether they can fund both.