High energy prices are rocking European businesses and homes | Economic news

By AYSE WIETING and SUZAN FRASER, Associated Press

ISTANBUL (AP) — Mehmet Bogday says his jaw dropped when he saw his electricity bill — it was more than the rent he pays for his Istanbul restaurant selling traditional Turkish wraps, and more than double of what he paid a month ago.

“It’s not sustainable,” said Bogday, restaurant owner Asmali Mescit Durumcusu. “If it continues like this, we will have to lay off staff. If it continues like this, we won’t be able to make it work. We’re either going to downsize or shut down and go sit at home.

Soaring energy prices are driving up utility bills from Poland to the UK, leaving people struggling to make ends meet and small businesses unsure they can stay afloat for much longer. In response, governments across Europe are racing to pass aid to soften the blow as energy prices drive inflation to a record high.

Nowhere is this squeeze more felt than in Turkey, where inflation has soared to almost 50% and sky-high electricity bills are sparking protests and fears about the survival of small businesses, such as the Bogday restaurant. .

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Protests against rising electricity prices erupted across Turkey this week, including some where police fired tear gas to disperse crowds. People are posting their electricity bills on social media to show how unsustainable the costs are. Shopkeepers are posting notices decrying the high bills on shop windows, while others have rallied outside power companies and set their bills on fire.

As in the rest of Europe, electricity generation in Turkey requires energy sources whose price has skyrocketed, including natural gas, which is in short supply. A huge drop in the value of the Turkish currency leads to soaring prices for imported gas.

As Europe’s energy demand rebounded from the depths of the coronavirus pandemic, it came up against gas reserves eroded by a cold winter last year, a lack of renewable energy generation during the summer and Russia was not selling as much gas as usual to Europe.

Utilities pass the costs on to customers, and people are hit twice: with higher bills at home and higher prices for businesses that also pay more for energy.

This led to a crisis in the cost of living in some places, but especially in Turkey, where households and businesses were already reeling from soaring inflation and a currency that lost around 44% of its value. last year, eating away at savings and making it difficult to buy even basic items like food. Authorities then raised electricity tariffs on January 1, pushing prices up 50% for many people and up to 127% for businesses and high-consumption households.

The leader of Turkey’s main opposition party this week joined a torrent of demands to withdraw price hikes, saying he would not pay his electricity bill until tariffs were lowered. Kemal Kilicdaroglu also called for reducing taxes on electricity tariffs.

In the face of growing criticism, President Recep Tayyip Erdogan made changes this month so that price hikes would be triggered when households use more energy, but that failed to provide relief. As price hikes threaten to hurt Erdogan ahead of next year’s election, his administration has said it is working on a possible readjustment or other measures to help people.

It’s something governments across Europe are doing as rising utility costs spark widespread outcry.

In Britain, energy prices are expected to rise by a record 54% – some 700 pounds ($940) a year – from April. The government says customers will get a reduction on their bills to be paid back in small installments over the next few years, and most will also get another local tax. In total, the government said most people would get about half of the additional costs reduced.

Similarly, Italian households are bracing for a record 55% increase in electricity and 42% gas in the coming weeks, according to energy regulators. This is after electricity prices rose in October.

To draw attention to the issue, the mayors plunged the historic town halls of Rome and Florence into darkness on Thursday evening. The association of Italian mayors said the government’s response so far was insufficient to help cities face hundreds of millions in additional energy costs, forcing them to choose between balancing budgets or cutting services.

Prime Minister Mario Draghi said this week that the Italian government was determined to draw up general measures in the coming days that will bring relief to “families and businesses facing difficulties due to the increase in electric power”. .

Polish regulators have approved a 37% rise in energy prices this year, pushing bakeries and other businesses to the point that many have had to close.

The right-wing government has temporarily reduced taxes on electricity, gas, fuels, some staple foods and fertilizers. This should reduce the energy costs of a family of four by around 120 zlotys (26.5 euros) this year. The reductions offsetting only part of the price increases, the government sets up a premium for households, ranging from 20 to 1,450 zlotys (4.5 to 320 euros) per year, depending on income.

Companies say this is not enough to balance their increased costs.

In Turkey, energy problems are aggravated by the president’s policies. Erdogan eschewed conventional economic thinking and pressured the central bank to cut interest rates despite inflation at its highest level in 20 years, pushing prices even higher.

Numan Kurtulmus, deputy leader of Erdogan’s ruling party, said the government’s support for energy placed “an extraordinary burden” on the treasury, making price hikes inevitable.

“It has been a heavy bill, we are aware of that,” he said, adding that the government was trying to bring inflation down.

Kazim Iscen, a painter and decorator in Ankara, said he had already fallen behind on his utility bills and would not be able to pay his electricity bill, which was “two or three times higher” this month. “I call on the government to have mercy on us,” he said.

Cengiz Sur, a bar and restaurant owner in Istanbul, said he unplugged fridges and heaters and turned off lights after his electricity bill this month exceeded his rent.

“We forgot about rent and are now trying to figure out how to manage our electricity bills,” he said.

Bendevi Palandoken, head of the Confederation of Merchants and Craftsmen of Turkey, warned that many businesses will close unless price hikes are removed and special tariffs are set to help small businesses.

“I think there will be a pullback from price increases,” said economist Ozlem Derici Sengul, founder of Istanbul-based Spinn Consultancy. “I think to curb public tension, we could see action from” government officials.

Fraser reported from Ankara. Burhan Ozbilici in Ankara; Sylvia Hui in London; Monika Scislowska in Warsaw, Poland; Colleen Barry in Milan; and Joseph Wilson in Barcelona, ​​Spain; and Karel Janicek in Prague contributed.

Copyright 2022 The Associated press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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