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Recently, Germany has become the target of public criticism after announcing a huge energy rescue plan of 200 billion euros. Poland’s prime minister called it German egoism and demanded that EU energy policy not be dominated by Germany, Italy’s outgoing prime minister accused Germany of undermining unity among EU member states, and European Commission President von der Leyen and some member states expressed concern that if German companies Surviving better with government subsidies would exacerbate economic disparities among member states and undermine competition in the common market.
200 billion euros is indeed an amount that would make many other EU member states jealous. Not all governments have such deep pockets. The most dazzling content of this plan, called the umbrella, is the natural gas price cap. At the EU level, Germany calls for EU unity, opposes setting a natural gas price cap, and opposes common debt. In this comparison, Germany’s “Lone Ranger” “The image seems to be solid.
At the just past EU summit in Prague, German Chancellor Scholz’s key task was to make a reasonable explanation for his “200 billion euros”. He first pushed back against accusations that Germany was acting alone, saying countries including Italy, Spain, France, the Netherlands and Germany had introduced similar measures. As for solidarity, the German people can’t wait until the EU level will introduce a natural gas plan that even Hungarian Prime Minister Viktor Orban agrees to. Moreover, the stability of the German economy, the EU’s largest economy, is also in the EU’s interest. At the same time, Scholz expressed incomprehensible that Macron is firmly opposed to Spain’s construction of the Midcat natural gas pipeline through West France to Germany. It seems that Macron is the one who does not show the spirit of solidarity.
For more than a month, EU member states have had their own ideas on how to respond to natural gas prices. In early September, European Commission President von der Leyen proposed setting a ceiling on Russian gas prices, saying that on the one hand, it would reduce the burden on EU consumers and on the other hand, squeeze Putin’s economic resources for the war. Countries including Hungary have strongly opposed this, while France, Estonia and the Netherlands have expressed an open mind. The European Commission’s energy department pointed out in its assessment that since the supply of Gazprom is already very limited, why not take a risk? At the same time, some people think that since the supply is limited, what is the point of setting a cap? According to Bruegel data on October 11, the proportion of Russian gas in the gas imports of EU countries and the United Kingdom has fallen to about 7%.
And 15 countries, including Poland, Belgium and Italy, demand a cap on all imported gas prices. Germany opposed both the Gazprom price cap proposal and all natural gas price cap proposals. The concern is that the former will cause Russia to immediately cut off supply, while central European countries, including the Czech Republic and Slovakia, are still receiving Russian natural gas; while the latter, with a price cap, natural gas suppliers outside the EU will only Shift to other markets, thereby exacerbating the shortage of natural gas supplies. Germany’s proposal is that EU member states work together to purchase natural gas and take advantage of the large market in Europe to drive down natural gas prices.
The problem is that Germany’s objection is that, according to EU rules, if Russia cuts off supply, Germany has to share natural gas with other countries. At that time, German Economy Minister Habeck had to clarify that Germany’s concerns were really not out of self-interest, but in consideration of the energy supply situation. He explained that the Russian gas received by Germany has been greatly reduced, and he also believes that Russia will not resume the supply of Nord Stream 1 in large quantities, and the Nord Stream pipeline leak has not yet occurred at that time.
Germany’s task of defending itself became more complicated when the German government announced its 200 billion euro plan at the end of September. In a press conference, a German government spokesman drew a distinction between Germany’s gas price brake, in which the government sets a fixed price and compensates for the difference between the fixed price and the market price, and the European Union’s gas price cap, while the latter Just simply set a fixed price for international gas supply.
When the finance ministers of the euro zone countries met in Luxembourg, German Finance Minister Lindner was also trying to remove the “Lone Ranger” label from Germany. He believes that the 200 billion euro plan is moderate in terms of the size of Germany’s economy and the time span of the plan until 2024, and is commensurate with the measures also introduced by other countries.
For several months, France and Italy have intervened significantly in the energy market to rescue their citizens and small and medium-sized enterprises. Spain and Portugal have set a ceiling on the price of natural gas used for power generation. Why is Germany the target? Lindner’s explanation is: perhaps no one realizes that the 200 billion euro plan is not only for 2022, but covers until 2024, the plan is not to stimulate demand, nor to stimulate economic growth through government subsidies, purely Revolt against Russia’s use of natural gas as a weapon. In addition, compared with countries such as Spain and France, Germany was more reliant on Russian natural gas in the past, and is currently facing a more severe situation.
A few days ago, the natural gas price proposal, which has been polished for many days by the Natural Gas Committee composed of German economics and interest groups, has been long-awaited. A fixed price is set for the quantity, while this year a one-time subsidy is implemented for households and small and medium-sized enterprises. For now, it’s up to the German government to make the final decision. In view of the low probability that the recommendation of the Natural Gas Committee will not be adopted, it can almost be concluded that, unlike the general price cap, the German gas price brake only subsidizes the electricity price of a certain consumption, and the excess part is still based on the market price. Theoretically will incentivize energy conservation, not consumption.
In fact, the most sensitive topic is not whether to set a ceiling on the price of natural gas, and what source to set a price ceiling on, but the common debt advocated by the European Commission and some member states. The Commissioner for the Common Market and the Commissioner for the Economy of the European Commission wrote in EU media, including German newspapers, that in order to avoid the phenomenon that different countries have different operating spaces, the EU must find a common mechanism to deal with the problem of natural gas prices, just like during the new crown epidemic. Short-time worker allowance scheme Sure. Sure is that the EU provides loans to member states on preferential terms to alleviate the risk of unemployment in member states hit by the epidemic during the state of emergency. Italy has also called for an EU plan of a common debt nature. During the epidemic, the European Union set up an economic recovery fund worth 750 billion euros. In the joint debt plan, Italy is the largest recipient and Germany is the largest contributor. In this regard, Scholz clearly objected, saying that only one-fifth of the epidemic recovery fund was used, and the rest could be converted to alleviate the energy crisis. What’s more, the recovery fund of debt mutualization is one-time and cannot be repeated.
In a discussion paper sent to member states at the end of September, the European Commission said a cap on gas prices would increase consumption and deprive LNG suppliers of incentives to supply Europe, as Germany has been wary. The document is more inclined to negotiate price cuts with natural gas suppliers Norway, the United States and Qatar, to establish a long-term win-win energy partnership, and member states can collectively increase their negotiating power, as Germany has suggested. At the same time, the European Commission does not seem to abandon the Russian gas price cap plan, proposing to ban the import of Russian gas above a certain price. The EU’s current sufficient gas reserves are sufficient to cope with the risk of Gazprom supply cuts, at least if the winter is not too cold. At the same time, the Commission proposed a cap on the price of natural gas used for power generation, which could reduce electricity prices, but member governments would have to compensate for the difference between the price cap and the actual market price. Gas price caps remained a key topic at the Prague summit in early October, but there was still no progress, with Germany still opposed to a price cap. At the next Brussels summit, the European Commission may come up with a plan.
(This article only represents the author’s own views, the author’s WeChat account zhangdongfang_49, editor in charge: Yan Man [email protected])