EU-wide gas price brake? Brussels bows to German conditions

“Solidarity is not a one-way street,” Jean-Claude Juncker, then President of the European Commission, told Hungarian Prime Minister Viktor Orbán a good five years ago. At that time it was about financial aid in the refugee crisis. But from a Brussels perspective, the quip is apparently just as relevant in the current energy crisis as it was back in September 2017.

This is shown in a recent letter from Ursula von der Leyen to the 27 EU heads of state and government. In it, von der Leyen listed possible options for reducing gas and electricity prices in the EU before the meeting of top EU personnel last Friday.

However, she also made it clear that a unified EU response to these issues is only possible if all member states show solidarity - especially those that regularly call for European solidarity.

At the summit meeting at Prague Castle, there was talk all day about European solidarity and that Germany was not showing enough solidarity towards the other EU countries. The 200 billion double boom package was criticized.

According to criticism from Italy and other member states, Germany is not showing solidarity if it only supports its own households and companies. Other countries would not have such financial leeway.

The demonstratively displayed indignation also served to unlock new billions for financially strapped states at the EU level. Italy, France, Belgium and the governments of other EU countries have been demanding a common European solution for gas and electricity price caps for months.

However, this is not only about a coordinated approach, but also about the joint financing of the necessary subsidies for electricity and gas customers through new joint debts at EU level.

There are concrete calls for a relaunch of the Corona reconstruction fund, for which the EU has taken on large amounts of joint debt for the first time. Another suggestion: Highly indebted EU countries such as Italy and Greece could take out loans that are also guaranteed by EU countries with particularly good credit ratings such as Germany. This would make loans cheaper for countries with lower credit ratings. The SURE program for short-time work benefits in the Covid crisis would be a model.

Demands for market intervention and new EU debt predated Russia's invasion of Ukraine, and Germany, the Netherlands, Denmark and other wealthy countries have resisted for just as long. The accusation of a lack of solidarity towards Germany builds up moral pressure.

However, Commission President von der Leyen made it clear at the end of last week that solidarity can only be demanded by those who act in solidarity themselves. In her letter to the heads of government, she says that EU price caps for imported gas and electricity are only possible if EU countries save more energy and are willing to help each other in crises.

“Almost all the gas consumed in the EU is imported. The more far-reaching the state intervention in the energy market that we envisage, the more we have to reduce demand and the more solidarity we need in supply," von der Leyen writes about a price cap for imported gas.

"Demanding obligations to save gas must therefore be prepared." "Mandatory solidarity agreements between member states" are also necessary. Von der Leyen writes about the price cap for gas that has been converted into electricity: "Such a measure requires mandatory savings targets to compensate for the weaker price signals."

It almost sounds as if these lines were formulated in the Berlin Federal Chancellery. Because the conditions described by von der Leyen reflect the federal government's frustration with its EU partners.

On the one hand, this applies to efforts to save electricity and gas. The EU gas savings targets agreed in early summer are initially only voluntary and riddled with exceptions that practically every EU country can claim for itself. The disappointment in the federal government that other EU countries were not willing to save more gas and to help Germany, which was particularly affected by the Russian gas supply freeze, was great, according to Brussels and Berlin.

The EU states only want to save on electricity voluntarily, only at peak times, when many price-boosting gas-fired power plants are switched on, consumption should be reduced by five percent. But here, too, the agreement provides for many exceptions.

This will have to change in the event of EU-wide interventions in the electricity and gas markets, it was said on the sidelines of the summit. "Many member states have made it very clear that we need to be a little tougher for next winter," said a senior member state official. "I expect that future negotiations will result in mandatory savings targets."

Von der Leyen's call for binding solidarity agreements between member states hits another sore point in German energy policy. EU rules stipulate that the member countries support each other in the event of supply crises. But here, too, the neighbors are leaving Germany out in the rain. Only Denmark and Austria have signed contracts with Germany for emergencies.

Other neighboring countries are meanwhile blocking: "In contrast, Belgium, Luxembourg, the Netherlands and Poland are evading the constructive negotiations and conclusion of the bilateral solidarity agreements with us," said a report by the responsible Bundestag committee at the beginning of September. A spokeswoman for the Ministry of Economic Affairs could not report any progress on Monday.

The solidarity debate will probably last for months: According to the Czech Council Presidency, the price cap for gas that has been converted into electricity will only be decided in the course of November.

And Olaf Scholz apparently wants to put off the price cap for imported gas for a very long time: Only a global price cap makes sense and for that you have to agree with other large gas customers such as Japan and South Korea, he said. As if it wasn't difficult enough within the EU.

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