Author: Don Obrien

Italy’s poor feel the pain from surging energy costs

Newsletter: Europe Express

Maria Grazia Zingarello could hardly believe her ears when Italy’s government warned that electricity bills could rise 40 per cent over the next three months.

“If the prices go up again, I won’t know where to turn any more,” said the 49-year-old caretaker from Milan who is already struggling to afford her rent, bills and food. “I often look at the calendar and think that I won’t make it to the end of the month.”

Her monthly salary of about €1,000 is the only stable income in the small apartment she shares with her two daughters and two grandchildren.

The family exemplifies why governments across Europe are growing alarmed at surging gas and electricity costs. They are discussing billion of euros in emergency packages to try to protect households, as well as small businesses that have struggled to stay afloat during the coronavirus pandemic.

On September 23, Italy’s prime minister Mario Draghi unveiled a €3bn package to mitigate the increase in energy prices, aimed at helping poorer households and small businesses to pay their bills.

The plan freezes gas and electricity bills for up to 3m households. Fixed charges for all families and 6m small businesses will be waived, and the rate of value added tax on natural gas cut from as much as 22 per cent to 5 per cent, in the fourth quarter.

Speaking to the country’s business confederation on Thursday, Draghi said the move had a “strong social value”. His government has already spent €1bn on intervening directly in the energy market to cut consumer prices.

Italy covers more than two-thirds of its energy needs with imports and gas accounts for more than half of the country’s residential energy consumption, much higher than in France, Spain and Germany. This means the soaring gas price is quickly feeding into steeper bills.

Italy’s consumer price inflation for energy rose to an annual rate of 20 per cent in August, the fastest rate in nearly 40 years and faster than the 15.4 per cent for the eurozone.

Line chart of Annual % change showing Italy's consumer energy inflation soared

Italians spend proportionately more of their income on electricity, gas and other housing costs than the rest of the eurozone, so rising energy prices have a big impact on household spending, particularly for those with lower incomes.

The rising costs of energy “are forcing poorer families to give up basic needs”, said Isabella Catapano, general director of Albero della Vita, an anti-poverty charity. “Bills are a fixed cost, a necessity that has to be paid. So families are progressively forced to spend less on other things, such as quality food or educational and recreational activities for their children.”

Italy’s unemployment rate is still above 9 per cent, more than twice the figure for Germany, and in 2020 about 5.6m people were considered in absolute poverty.

High energy costs are also hitting businesses, with prices of industrial products soaring at an annual rate of 12.3 per cent in August, sharply up from under 1 per cent at the start of the year.

Silvia Barbati, 37, who runs a local gym in Rome’s Trieste neighbourhood, is worried that price rises could mean the sacrifices made by small businesses like hers during two years of intermittent pandemic lockdowns were in vain.

“Our activities have already been drastically reduced during Covid and we are now trying to get back on our feet. I do hope the next bills won’t be sky high,” she said.

Many families and small businesses fear they will not stay afloat, said Paolo Peroso, president of Amici di Porta Pia, a traders association in central Rome.

“There is a lot of confusion and fear at the moment . . . bills that could be all of a sudden 30 or 40 per cent higher than usual is absurd,” he said. “It could be difficult to absorb, especially for those who have to keep shop windows, lights or refrigeration on all day long. Some are worried they won’t be able to make it this time.”

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Oliver Bolt

Oliver Bolt

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