European unity put to the test by the energy crisis

Flaws in European solidarity, hitherto hardly visible, are beginning to appear in broad daylight, as the energy crisis worsens on the Old Continent. A new bone of contention emerged this week: the giant aid plan announced by Germany -200 billion euros- to protect its economy threatened with recession due to soaring gas and electricity prices.

Mario Draghi took the floor to openly criticize the measures taken by Olaf Scholz’s government. “We cannot divide ourselves according to the room for maneuver of our national budgets”, declared the Italian Prime Minister, on the departure after the victory of Giorgia Meloni in the elections of September 25.

Impact on competition

Calling to “avoid dangerous and unjustified distortions of the internal market”, Draghi highlighted a problem that is likely to grow in importance in the coming months. Rich and low-indebted countries like Germany have greater means than poorer Member States in Central and Eastern Europe, or over-indebted like Italy or Greece. They will therefore be able to better support their businesses.

Thierry Breton also stepped up, declaring that it would be necessary to “look in detail” at the German plan and assess its “impact on the fair conditions of competition in the internal market”. The European Commissioner for the Internal Market calls for support for businesses “to be carried out with great transparency, consultation and European coherence”. At the Quai d’Orsay, Germany is not targeted so directly, but the need to take into account the countries of the East and the South is underlined.

Berlin against a gas price cap

Some member states were irritated by the timing of the German announcement, which came on Thursday on the eve of a meeting of European energy ministers. Especially since it is precisely Berlin that is blocking one of the flagship measures defended by fifteen other capitals including Paris and Rome: the establishment of a ceiling price for gas. The Scholz government fears that such a cap will cause a gas shortage. One in ten German industrialists has already reduced production because of energy prices.

This skirmish between Europeans casts a shadow over a hitherto solid response from the Union. Friday in Brussels, the Twenty-Seven agreed on measures of an unprecedented scale, which would have been unimaginable only a few weeks ago.

Reduce consumption

Each Member State will have to take measures to reduce its electricity consumption by 5% during peak hours, between December 1 and March 31. The Twenty-Seven will also have to recover part of the surplus profits made by certain low-cost electricity producers (nuclear, coal, renewables).

Profits generated when electricity is sold at more than 180 euros per megawatt hour between December 1 and June 30 will have to be confiscated to fund consumer support measures such as retail price freezes.

Tanker tax

Third measure confirmed Friday, the Twenty-Seven will have to tax the oil companies on their European activities of production of hydrocarbons and refining. A minimum rate of 33% will apply to profits deemed excessive in 2022 (profits 20% higher than the average of the last four years).

These levies on electricity producers and oil companies should bring in 140 billion euros, or around 1% of the Union’s GDP, the Commission estimated. This sum should help the States to finance crisis measures such as the freezing of gas and electricity prices. Many doubt that we can raise so much money.

Even if this were the case, it is largely insufficient compared to the explosion of the energy bill of the Old Continent, estimated at more than 6% of GDP over the next two years by Citi analysts. “We must go further,” insisted Agnès Pannier-Runacher, the French Minister for Energy Transition, in Brussels on Friday.