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Tuesday, December 6, 2022

High Energy Prices Cause Widespread Issues in Europe

Mehmet Bogday says his mouth dropped when he saw his power bill, which was more than double what he spent a month earlier and was greater than the rent he pays for his Istanbul restaurant, which sells traditional Turkish wraps.

Bogday, who runs the Asmali Mescit Durumcusu restaurant, stated, “This is untenable.” “If things keep going this way, we’ll have to lay off people.” We won’t be able to make this work if things keep going this way. We’ll either downsize or shut up shop and stay at home.”

From Poland to the United Kingdom, rising energy prices are driving up utility bills, leaving households struggling to make ends meet and small companies unsure how long they can stay alive. As a result, governments throughout Europe are hurrying to provide aid to cushion the blow as energy costs drive inflation to new highs.

Turkey, where inflation has reached over 50% and expensive power prices have sparked demonstrations and concerns about how tiny companies like Bogday’s restaurant would survive, is feeling the pinch the most.

Protests against energy price rises erupted across Turkey this week, with police using tear gas to disperse protesters in some cases. People are sharing their electrical bills on social media to demonstrate how expensive it is. Shopkeepers are posting posters in their windows criticizing excessive rates, while others have gathered outside power firms and lit their invoices on fire.

Turkey, like the rest of Europe, relies on energy sources that have risen in price, such as natural gas, which is in short supply. The price increase in imported gas is being driven by a massive collapse in the value of Turkey’s currency.

As Europe’s energy consumption surged during the coronavirus outbreak, it ran against gas stocks depleted by a hard winter last year, a dearth of renewable energy output throughout the summer, and Russia not sending as much gas to Europe as normal.

Customers are paying more for energy because utilities are passing on the expenses to them. People are being hammered twice: with higher rates at home and increased charges from companies.

In other countries, it’s caused a cost-of-living catastrophe, particularly in Turkey, where people and companies were already dealing with sky-high inflation and a currency that lost 44% of its value last year, eroding savings and making it impossible to buy even basic necessities like food. On Jan. 1, the government increased power costs by 50% for many people and as much as 127 percent for enterprises and high-consumption families.

This week, the head of Turkey’s largest opposition party joined a chorus of calls for the price rises to be reversed, stating he would not pay his power bill unless the prices were reduced. Kemal Kilicdaroglu also advocated for lower electricity taxes.

Faced with rising criticism, President Recep Tayyip Erdogan announced reforms last month to ensure that price increases occur only when households consume more energy, but this hasn’t helped. With price spikes threatening to harm Erdogan ahead of next year’s elections, his administration has announced it is considering a readjustment or other steps to assist people.

It’s something that governments around Europe are doing in response to public uproar over growing electricity rates.

Starting in April, energy costs in the United Kingdom will rise by a record 54 percent, or around 700 pounds ($940) each year. Customers will receive a reduction on their bills, which will be paid back in tiny increments over the following several years, according to the government, and most will also receive money off another municipal tax. In sum, the government estimates that most people will save around half of the additional cost.

Italian homeowners may expect a record 55 percent hike in electricity and a 42 percent increase in gas in the coming weeks, according to energy officials. This follows an increase in power costs in October.

To call attention to the problem, the mayors of Rome and Florence turned out the lights in their ancient city halls on Thursday night. The government’s reaction, according to the Italian mayors’ organization, has been insufficient in assisting cities in dealing with hundreds of millions of dollars in increased energy expenses, forcing them to choose between balancing budgets and slashing services.

Premier Mario Draghi stated this week that Italy’s government is committed to drafting comprehensive measures in the next days to help “people and companies who are experiencing problems as a result of the increase in electric energy.”

Polish officials allowed a 37 percent increase in energy rates this year, putting a strain on bakeries and other companies to the point that several had to close.

Electricity, gas, motor fuels, some food staples, and fertilizer have all been temporarily reduced in price by the right-wing administration. This is projected to save a household of four 120 zlotys (26.5 euros) in energy bills this year. Because the price cuts only cover a portion of the increases, the government is providing a bonus to households, ranging from 20 to 1,450 zlotys (4.5 to 320 euros) each year, depending on their income.

Businesses claim that this is insufficient to offset their rising costs.

The president’s measures in Turkey are exacerbating the country’s energy problems. Erdogan has defied conventional economic wisdom by pressuring the central bank to decrease interest rates, despite the fact that inflation is at a 20-year high, driving prices even higher.

Government assistance for energy, according to Numan Kurtulmus, a deputy leader of Erdogan’s ruling party, places “an incredible weight” on the purse, making price rises unavoidable.

“We are conscious that it has been a large expense,” he added, adding that the government was attempting to reduce inflation.

Kazim Iscen, an Ankara painter and decorator, said he had already fallen behind on his energy bills and would be unable to pay his power bill, which this month was “two or three times higher.” “I implore the administration to spare us,” he said.

After his electricity bill this month exceeded his rent, Cengiz Sur, the owner of an Istanbul pub and restaurant, said he has been disconnecting refrigerators and heaters and turning off lights.

He explained, “We’ve forgotten about rent and are now trying to find out how to pay our power bills.”

The chairman of the Turkey Tradesmen and Artisans Confederation, Bendevi Palandoken, has warned that unless the price rises are reversed and special tariffs are imposed to support small firms, many businesses may close.

“I believe the price rises will be rolled down,” said economist Ozlem Derici Sengul, founder of the Spinn Consultancy in Istanbul. “I believe we will see some action from” government authorities in order to reduce public angst.

Cedric Blackwater
Cedric Blackwater
Cedric is a journalist with over a decade of experience reporting on local US news, and touching on many global topics. He is currently the lead writer for Bulletin News.

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