On Thursday 9 April, the European Commissioner for Economy, Valdis Dombrovskis, did not rule out the possibility of a European tax on the windfall profits made by oil companies as a result of the offensive carried out by the United States and Israel in Iran. Several EU Member States have approached the European Commission with requests to this effect, and the Commission is assessing the possibility of “a more coordinated approach at European level”, Mr Dombrovskis told MEPs on the European Parliament’s Committee on Economic and Monetary Affairs (ECON).
“Strictly speaking, there is nothing preventing member states for applying this windfall profit tax, because direct taxation is by and large within the competencies of member states”, the European Commissioner pointed out, however, when questioned by MEP Pasquale Tridico (The Left, Italian).
The latter is calling for the rapid introduction of a mechanism of this sort at EU level. “The markets and speculation move much faster than politics, and we would not want this to result in a late, watered-down compromise in the face of billions of euros in extra revenues generated as a consequence of the war in Iran. This European tax could be introduced as a solidarity contribution to be redistributed to families and businesses that are paying the heaviest price of this war”, he stated in a note sent to Agence Europe.
According to the Financial Times, the French group TotalEnergies made a profit of nearly €868 million in March by buying large quantities of oil in advance of the price surge.
No activation of the escape clause in the Stability and Growth Pact. The European Commissioner reiterated on Thursday that the conditions had not been met to trigger the general escape clause of the Stability and Growth Pact (see EUROPE 13838/1), as was the case during the Covid-19 pandemic in 2021.
“The condition for activating this clause is the existence of a severe economic downturn in the euro area or the EU as a whole. We are not currently in this scenario”, declared Mr Dombrovskis.
‘Stagflation’ prospects. According to the Commission, the EU is exposed to the risk of a ‘stagflationary’ shock combining a slowdown in economic growth and a surge in inflation.
“The [...] two-week ceasefire brings some much-needed de-escalation. This is also reflected in the energy markets, with Brent crude oil now trading below $100 per barrel”, noted Mr Dombrovskis. He added: “But the longer-term outlook still remains clouded by profound uncertainty”.
According to the Commission’s analysis, EU growth in 2026 could be 0.2 to 0.4 percentage points lower than projected in the autumn economic forecasts (see EUROPE 13753/12), assuming short-lived disruptions. In this scenario, inflation on the other hand could be higher, by up to 1 percentage point.
However, “if supply disruptions prove more substantial and longer-lasting, the negative consequences for growth could be even higher”, warned the Commissioner on Thursday. In this case, growth would be cut by 0.4 to 0.6 percentage points, while inflation would rise by 1.1 to 1.5 percentage points in both 2026 and 2027. (Original version in French by Bernard Denuit)