Germany’s bid for a massive loan package to help its economy weather the energy crisis has heightened tensions among EU member states as they scramble to find a common approach to cutting gas and electricity prices at meetings in Brussels.
The €200 billion plan announced by Berlin on Thursday has been described by Chancellor Olaf Scholz as a “double Ka-boom” that would help poor household consumers as well as industry pay ever-higher energy bills this winter.
But the level of support and the timing of the announcement on the eve of an emergency meeting of energy ministers in Brussels on Friday provoked a backlash within the EU. Several diplomats argued that Berlin was using its fiscal firepower while other capitals struggled to fund support.
An EU diplomat said the German package had sparked “hostility” as the bloc tried to find a common approach to “tackle the problem at its root”. Berlin is also opposed to a gas price cap, which is backed by more than half of EU member states.
Ministers on Friday agreed on three proposals to lower electricity prices for consumers and businesses, including a mandatory 5 percent reduction in peak electricity consumption, a windfall levy on fossil fuel companies and a €180/MWh cap on the price of electricity is not produced -Gas power generators with higher revenues that are fed back to consumers.
But after intense negotiations, there was no agreement on a gas price cap, which several member states, including Germany, fear could increase demand and divert gas the EU badly needs to other regions willing to pay more for supplies to count.
Mario Draghi, Italy’s outgoing prime minister, said after Germany’s announcement that “in the face of the common threats of our time, we cannot divide ourselves by place in our national budgets”.
Guido Crosetto, a top adviser to Giorgia Meloni of the far-right Italian Brothers party, which garnered the largest share of votes in the country’s recent elections, lashed out head-on at Berlin’s energy policies. “It’s a precise, intentional, unagreed, unshared, uncommunicated act that undermines the rationale for the union,” he said.
Erected in Berlin as a “shield” for industry and households, Scholz’s €200 billion plan will be funded by new loans and channeled through the reactivated Economic Stabilization Fund, an extrabudgetary facility set up in 2020 to help companies survive the Covid 19-crisis help -19 lockdown.
Federal Economics Minister Robert Habeck defended the Berlin plan at the meeting in Brussels, saying that it met the need for European solidarity and pointed out that other member states had already made major interventions to reduce energy costs. “We’re doing the same thing other countries did a long time ago,” he said.
Georg Riekeles, deputy director of think-tank European Policy Center, said Germany has a “special responsibility” for strengthening EU solidarity as it contributes to building Europe’s dependence on Russian gas and because Berlin has “fiscal space”. dispose to respond to crisis. But the energy shield announced by Scholz “fundamentally disturbs the balance of the internal market and does not appear sustainable,” he said.
Claude Turmes, Luxembourg’s energy minister, on Friday called on the European Commission to update its state aid rules to “stop this mad race by different governments to outdo other governments at such a difficult moment in Europe. . . and stop quarreling amongst yourselves.”
Berlin’s opposition to a gas price cap has sparked frustration in 15 EU countries alongside the Netherlands and Denmark, including France, which wrote to the Commission this week asking it to speed up work on such a measure.
Susanne Ungrad, spokeswoman for the Ministry of Economic Affairs, said on Friday morning that Berlin does not support the idea of a “rigid upper price limit” because there is a risk that not enough gas can be bought on the world markets, “which would be counterproductive”.
Germany has backed an EU idea to form a European consortium to buy gas on world markets, she added.
A senior EU diplomat said the timing of Germany’s package was seen as a “sign of intransigence” but Berlin should support the gas price cap because if the spending plan were “applied in parallel with a price cap, the cost to the German government would escalate would halve €100 billion”.
Additional reporting by Amy Kazmin in Rome and Guy Chazan in Berlin
https://www.ft.com/content/f52b06b9-3932-44ca-b831-777cf68c3dc8 German 200 billion euro plan to support energy supply triggers “animosity” within the EU