October 26, 2021

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Brussels wants to become a European buyer of gas, 'strategic reserve' must resist price hikes |  Abroad

Brussels wants to become a European buyer of gas, ‘strategic reserve’ must resist price hikes | Abroad

Brussels wants to buy gas for the whole of Europe, just as it is already doing with Corona vaccines. In addition, you want to separate the price of electricity from the price of gas. This dual approach could prevent the price of gas from rising to the surface, and too high electricity prices could spell the death knell for climate policy.




Both proposals are part of a package that the European Commission will send to member states by the middle of next week. European Commissioner for Economic Affairs Paolo Gentiloni has already lifted a corner of the veil in Luxembourg this evening, after French and Spanish Finance Ministers Bruno Le Maire and Nadia Calvino attacked their Eurogroup colleagues with exactly the same ideas. So it wasn’t the European Commission, because it looks like it’s already working on plans for a strategic gas reserve.

Various countries responded positively this afternoon, according to Gentiloni, but the finer details still require a lot of study. “They are not easy or traditional solutions, so we have to look at them closely.” Quite apart from the fact that there are countries that, by definition, take a stand when national policy threatens to move to Brussels.

Freezes

According to Le Maire, with the support of Eurogroup President Pascal Donohue, the massive increases in gas prices in recent weeks are “a major concern to all of us”. “In France we responded by freezing the price of gas, but a European response is also needed.”

In other words, strategic gas reserves and electricity and gas prices separation. The current link is “totally ineffective,” according to Le Maire. “We cannot leave it that way. We cannot use more and more electricity as part of our climate policy and then allow its price to be determined by the price of gas.”

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In his plans and those of the authority, there will be a new price for electricity based on production costs. At once, Le Maire promoted the French energy mix with a high percentage of nuclear energy. “It makes us less dependent on third parties and does not result in CO2 emissions.” His Spanish colleague Calvino also thinks gas reserves and co-purchasing are a great idea: “It has worked well with the corona vaccines.”

Complete surprise

For quite a few Eurogroup ministers, the French/Spanish plan, in parallel with that of the Commission, came as a complete surprise. They just prepared for an exploratory discussion. “It’s too early to make proposals now, and the problem is too complex to make decisions so quickly,” a diplomat said. “Coordination is the key word,” Gentiloni said.

That is why the Commission is currently analyzing the reasons for the high cost of energy, considering whether it is temporary or permanent and making proposals. Part of this is the list of measures that the member states themselves can take in order to mitigate the worst price peaks for families and possibly businesses without any problems with European legislation.

At the same time, Gentiloni warned against “overreacting”. He expects inflation to fall from 3.4 percent last month again later this year or early next. “We definitely need measures for the most vulnerable households, but they should not conflict with our climate policy. We have to find a good balance in that.”

Vulnerable citizens and companies

The discussion will continue over the next few days. Tomorrow in the shadow of the 27 EU finance ministers, tomorrow evening at a dinner for heads of state and government in Slovenia, on the sidelines of a summit with the Western Balkan countries, and on Wednesday in a debate with the European Parliament. Later this month, concrete decisions will be made at an official summit of EU heads of state and government.

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Ministers today looked at high energy prices from different angles: the cost side for vulnerable citizens and businesses, the impact on the economy, inflation and on climate policy. Le Maire clearly noted that higher gas prices, he said, temporarily boost inflation: “I see a clear link with a strong economic recovery.” But he believes this should not be an excuse, as for some of his colleagues, not to interfere. “They will have to explain it themselves to vulnerable families who will have to pay an extra 400 to 500 euros at the end of the year, or to our companies with a competitive disadvantage. The status quo cannot be the answer for sure.”

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