Putin’s war on power is testing unity among EU nations
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Russia’s ongoing war in Ukraine is creating a “very difficult” situation in Europe, testing the unity of its countries not only in how they respond to Putin’s aggression, but also in how they deal with the consequences.
The effects of the energy conflict have rippled across Europe: Germany is scrambling to tighten natural gas reserves, French President Emmanuel Macron has encouraged people to reduce gas consumption by 10% before winter, and Italy is looking to roll back gas consumption by 7. %.
“We have never had such a difficult experience,” Paolo Gentiloni, the EU’s economic commissioner, told CNBC on Oct. 12.
I’m calling [for] European action, European unity, because the experience we had in the previous crisis … was that to work together, to respond together, you can not only avoid differences between European countries but have a strong, strong response,” said Gentiloni, referring to the unanimous, although “slow” purchase and release of vaccines of the Covid-19 vaccine in 2021.
Gentiloni also referred to a “common tool” that could be used across the EU to help member states fight the energy crisis.
“I don’t call it a common debt,” Gentiloni insists, “because we have a big common debt in what we call the next generation of the EU. I call it a common instrument based on loans to deal with the emergency we have,” he said.
Divisions by level?
But differences are beginning to show how countries approach the energy crisis.
Poland, Belgium, Italy and Greece are among the countries proposing a gas “price corridor” across Europe in an effort to cope with rising prices.
The gas price corridor, “must act as a circuit breaker and not encourage speculation. It is not intended to suppress prices at a low level,” according to the draft proposal, as reported by Reuters.
But other countries, including Germany, are thought to be against the plan fearing the price hike could have a negative impact on energy security.
The corridor is expected to be discussed on Oct. 7, but no details have been released.
Meanwhile, Germany is already making preparations as winter approaches.
Chancellor Olaf Scholz announced 200 billion euros ($193 billion) to support basic consumption for households and small and medium-sized companies on September 30.
But Germany’s isolation from the wider European community has raised questions about the country’s commitment to a united response to the energy crisis, with fears the package could have a negative impact on the country’s neighbours.
When asked if Germany should commit to not buying energy before other European countries, Gentiloni said it would be “a very good step.”
“I’m not just talking about Germany, [but also] of Italy, in other countries that are understood alone in looking at energy sources, another way[s] on Russian fossil fuels,” Gentolini said.
“I’m not criticizing Germany,” Gentiloni insisted, “but I’m asking for something more from the EU.”
Others have been outspoken about Germany’s role in Europe’s energy crisis, including Polish Prime Minister Mateusz Morawiecki.
“This is our collective problem,” said Morawiecki, “it cannot be, that one country, the richest and most developed country in Europe like Germany… can prevent everything that is happening now,” he said, referring to the proposed gas corridor.
“We don’t want to be forced by other countries to behave in a completely different way than they were expected to do before,” he told CNBC’s Charlotte Reed in an exclusive interview on Oct. 6.
Poland’s Finance Minister, Magdalena Rzeczkowska, took a balanced approach, saying that while Europe should try to “find common solutions for all” that would not “disrupt the level playing field in Europe,” she could understand why countries would put forward their own proposals.
“Energy negotiations are taking a long time,” Rzeczkowska told CNBC’s Geoff Cutmore at the 2022 Annual Meetings of the International Monetary Fund and the World Bank Group in Washington, DC.
“Poland [also] to create our own programs, our own solutions, because we cannot wait. But for now, we have to be strong, we have to have a coordinated approach,” he said.
Eurogroup President Pascal Donohoe said he also understands why countries are introducing their own policies rather than waiting for an EU-wide consensus.
“Every single government is looking for appropriate measures from their governments,” he said, also speaking in Washington.
IMF chief economist Pierre-Olivier Gourinchas said he could not comment on whether Germany’s plan would work as “we don’t have the details yet.”
While details are yet to be released, the plans are set to run until 2024, and include electricity and gas price brakes, the revival of the Economic Stabilization Fund, which was used to bail out Lufthansa during the pandemic, and a cut in gas VAT.