Cost of living crisis: What is the rest of the G7 doing? | G7

As Liz Truss’ government prepares to unveil a huge package of tax cuts and energy price caps for UK households and businesses worth an estimated £150bn

France

French ministers argue that France has been the most generous country in Europe in helping households deal with the cost of living crisis, particularly by limiting gas and electricity price increases. Gas prices will remain frozen until the end of this year and increases in electricity prices will be limited to 4%. Electricity and gas price increases for households will be capped at 15% early next year.

Last month, the French parliament passed a wide range of new measures for households as rising inflation erodes wages. These include raising public sector salaries, raising pensions and some social benefits by 4%, capping rent increases at 3.5% for existing tenants in mainland France and raising means-tested student grants.

The government has also subsidized a discount on petrol and diesel prices. Originally worth 18 cents per litre, this will be raised to 30 cents in September and October and reduced to 10 cents from November.

Businesses are encouraged to offer employees an annual tax-free bonus of up to €6,000 (£5,240), up from a previous limit of €1,000. Workers who fall under the 35-hour week can convert overtime into extra money.

The government has also abolished the television license (€138 per year in mainland France).

Last December, the government made a one-off payment of €100 to help low-income families cope with rising fuel prices. In September, the government gave low-income families on welfare an “extraordinary” grant of €100 – plus €50 for each child.

Since autumn 2021, the cap on gas and energy prices, including fuel discounts, has cost the French state 24 billion euros. In response to the energy crisis, France will also fully renationalize its indebted power giant EDF.

Angelique Chrisafis

France will fully renationalize its electricity giant EDF. Photo: Pascal Rossignol/Reuters

Italy

The Italian government has pledged €59.2 billion to protect homes and businesses from rising energy prices since last September, with the latest €14 billion tranche announced by Prime Minister Mario Draghi last week.

He said the package puts Italy “among the countries in Europe that have spent the most” to address the problem. Measures include increasing and extending tax credits for energy-intensive businesses through November, relief for small and medium-sized businesses, and more financial support for low-income families.

The program also includes a one-time grant of €150 for 22 million workers and retirees with annual incomes of less than €20,000. Meanwhile, a reduction in the excise duty on gasoline will remain in effect until the end of November. Draghi said the government was helping “families and businesses without jeopardizing public finances and causing tensions in markets”.

After Sunday’s elections, however, a new government will be responsible for enforcing the measures and tackling cost-of-living challenges in the coming winter. A coalition of Italy’s far-right brothers League and Silvio Berlusconi’s Forza Italia is expected to win the vote and renew at least some of the measures to get Italy through the winter.

Angela Giuffrida

The logo of the German energy supplier Uniper
Germany is to nationalize the energy supplier Uniper. Photo: Thilo Schmulgen/Reuters

Germany

A total of three bailout packages have been announced so far by the federal government to help consumers and businesses deal with inflation, which stood at 7.9% in August.

The measures with a total volume of more than 95 billion, a one-off flat rate of 200 euros for students, an increase in rent subsidies to cover rising heating costs, an increase in social assistance by 500 euros, a one-time bonus of 100 euros per child and a permanent increase of 18 euros per child per month in child benefit .

Germany is also shifting income tax brackets to avoid increased tax liabilities, expanding government lending facilities to help otherwise healthy businesses, and expanding a heavily subsidized public transport ticketing system (to be finalized).

This includes backing an EU effort to curb energy company profits (under discussion), as well as measures to curb the tremendous pace at which electricity bills are rising and delaying the implementation of a planned carbon price hike in 2024.

The government promised to do “everything to ensure that the energy supply continues to function”. That includes this week’s decision to nationalize utility Uniper for €29 billion, on top of the €11 billion it has already invested in two other gas importers.

Kate Connolly

A man fills his tank with petrol in central Rome in June.
A man fills his tank with petrol in central Rome in June. Photo: Alessandra Tarantino/AP

Japan

Japan’s Prime Minister Fumio Kishida has seen his approval ratings plummet after the assassination of Shinzo Abe amid rising prices and revelations about his party’s ties to the Unification Church.

After decades of deflation, households in the world’s third-largest economy are hit by a surge in energy bills and will pay more for another 6,500 groceries – including daily staples like bread and pasta – through next month. While the rise in inflation has been moderate compared to many other countries, consumer inflation has exceeded the Bank of Japan’s target of 2% for five consecutive months.

To soften the blow, Kishida said the government will aim to keep the price of imported wheat at current levels and will consider maintaining subsidies for oil wholesalers to stabilize gasoline and kerosene prices. He has called for nuclear reactors that passed the post-Fukushima safety tests to be restarted to meet the expected surge in electricity demand this winter.

The Bank of Japan’s decision to maintain ultra-low interest rates — a stance it maintained on Thursday — helped push the yen to a 24-year low against the US dollar, fueling the rise in the cost of imported fuel and food.

In response, the government intervened in currency markets on Thursday for the first time since 1998 and is likely to present a supplementary budget in the coming weeks that could include at least $105 billion in new spending targeting struggling retailers and households.

Justin McCurry

Justin Trudeau
Canadian Justin Trudeau announced new measures to deal with the sharp increase in the cost of living. Photo: Canadian Press/Rex/Shutterstock

Canada

Canadian Prime Minister Justin Trudeau recently announced new measures to deal with sharp rises in the cost of living across the country, including the worst food price hikes in four decades. His government is facing increasing political pressure to help those hardest hit as inflation exacerbates an ongoing affordability crisis.

Trudeau expects Parliament to pass the new measures in the coming weeks, including a one-time $500 benefit for low-income renters. A six-month doubling of the sales tax rebate for low earners is expected to affect at least 11 million Canadians. A new dental care program for children in low-income families is introduced, granting families CAD$1,300 per child over a two-year period. Canada’s intervention will cost CAD 4.5 billion.

Most of the measures had been pushed by the left-wing New Democratic Party, which agreed to keep Trudeau in power until 2025 in exchange for a welfare program that would benefit vulnerable and low-income populations.

Canada’s inflation rate eased to 7% from 7.6% in the previous month as gasoline prices fell but food costs remained high.

“While we’re moving in the right direction, that’s still too high,” Paul Beaudry, the deputy governor of the Bank of Canada, said in a recent speech.

Leyland Ceco

United States

One issue is at the top of US voters’ minds as Joe Biden fights to remain in Congress in November’s midterm elections: the cost of living crisis.

Inflation is now at its fastest pace since the 1980s, driving up the cost of everything from food and shelter to cars and medical care.

The Federal Reserve has led the fight to bring prices down, announcing a series of unusually large rate hikes in hopes of slowing the economy and bringing inflation back to its target rate of 2% from its current level of 8.3%.

But the Biden administration has a number of plans of its own, many inspired by the supply chain issues that have emerged during the coronavirus pandemic, aimed at making the U.S. more resilient to sudden price swings.

Plans include the Inflation Reduction Act – expected to cost $437 billion over 10 years.

It will reduce prescription drug and health care costs and increase spending on green energy technologies. The plan also calls for spending $52 billion to boost domestic semiconductor production. Semiconductor shortages drove prices of everything from cars to cellphones soared during the pandemic.

Biden has also approved the release of 1 million barrels per day of oil from the Strategic Petroleum Reserve – the US’ vast underground oil stockpile – to lower gas prices.

Dominic Rush

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