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ENERGY

Swiss drivers fuel a cross-border rift with France

As petrol is cheaper in France than in Switzerland at the moment, many Geneva residents cross the border to fuel up their cars. However France's cheaper prices are ultimately funded by the French taxpayer, and some French officials are none too happy about this 'pump tourism'.

Swiss drivers fuel a cross-border rift with France
Swiss motorists are fuelling up their cars at French pumps. Image by IADE-Michoko from Pixabay

Geneva area residents have been shopping in nearby France for years, as most goods are cheaper on the other side of the border.

It is not unusual to see cars with Geneva and Vaud registration plates in parking lots of French supermarkets, and this practice, known as ‘shopping tourism’, has been boosting the economies of border regions for decades.

Lately, however, ‘shopping tourism’ has spawned off a new phenomenon dubbed ‘pump tourism’, as an increasing number of cars from Switzerland fill up at French petrol stations with cheaper petrol/gasoline or diesel.

A litre of fuel in Geneva now costs 2.20 francs, while the price is €1.80 just across the border. Given the exceptionally strong franc and favourable (for the Swiss) exchange rate — €1.04 for 1 franc — buying a full tank of gasoline in Haute-Savoie makes financial sense.

READ MORE: Petrol to top CHF2 per litre in several Swiss cantons

But the cheaper pump prices in France are the result of the government fuel rebate of 18 cents per litre – as this is ultimately funded by the French taxpayer, some of the French are none too happy about Swiss motorists benefiting.

Loïc Hervé, a senator from Haute-Savoie, suggested that the Swiss are taking advantage of French state aid on the price of fuel in France.

“We absolutely have to give priority to French people.  We should not be helping out the rich, the Swiss, and foreign tourists. It’s as simple as that”, Hervé, told Tribune de Genève in an interview.

Geneva State Councilor Mauro Poggia swiftly responded to Hervé’s comments, pointing out that cross-border workers from France have been benefiting for years from perks offered by Swiss employers, such as higher salaries.

READ MORE: EXPLAINED: Who can work in Switzerland but live in a neighbouring country?

“And let’s not forget that the French also fill up their cars in Geneva before returning home, and it hasn’t bothered anyone”, he said.

In fact, before Russia invaded Ukraine in February, unleaded gas was less expensive in Switzerland than in France.

The reason this is no longer the case is that France, along with Switzerland’s other neighbours, Germany, Italy, and Austria, have put in place a fuel rebate on petrol and diesel – at present this is 18 cents per litre, but it will rise to 30 cents per litre in September.

The Swiss government was considering a similar tax cut as well, but the Council of States rejected this proposal in June amid concerns about how to compensate for the lost revenue. 

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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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