Germany can and must pave the way for EU energy solidarity | Opinions

Winter is coming to Europe and with it high energy prices, which could see many Europeans struggling to keep their homes warm. Still, it seems that Germany has its citizens covered. On September 29, Chancellor Olaf Scholz presented a plan for a 200 billion euro ($197 billion) energy package, which caused a stir across the European Union.

Although other EU countries used public subsidies to contain energy costs, none could afford the amount allocated by the German government. It was seen as a unilateral decision at a time when Brussels was looking for a common response to the energy crisis. From west to east and south, Berlin’s decision was heavily criticized.

French President Emmanuel Macron has said Germany risks “isolating itself” after failing to adequately coordinate its response to the energy crisis with the rest of the EU. Former Italian Prime Minister Mario Draghi saw the package as a divisive move. Less diplomatic, Hungarian Prime Minister Viktor Orban called it “cannibalism”.

For Berlin, this financial stimulus seemed proportional to the size and vulnerability of the German economy. According to data from the European Commission, Germany’s expected gross domestic product (GDP) growth in 2022 is 1.4%, which is rather modest compared to other EU countries. Italy is expected to grow by 2.9%, France by 2.4%, the Netherlands by 3% and Hungary by 5.2%.

Certainly, negative economic trends in Germany, which is the EU’s largest economy, will also have undesirable repercussions for the rest of the bloc. After all, 64% of German imports come from EU member states and the country has been one of the biggest contributors to the EU budget and its post-COVID recovery plan.

Germany has been massively affected by the energy crisis. Prior to the large-scale Russian invasion of Ukraine in February, the country bought 55% of its gas from Russia. At the moment, it does not import gas from Moscow.

After an explosion knocked the Nord Stream 1 gas pipeline out of service and Nord Stream 2 never came on stream, Germany had to start buying more gas from other more expensive suppliers. Gas is still the main source of energy, covering about 27% and is therefore a major factor determining the final price of electricity. This is certainly having an unprecedented effect on the costs incurred by the industrial sector, which itself contributes 23.4% of German GDP.

The announcement of the energy package was undoubtedly dictated not only by economic concerns but also by domestic political considerations.

With 62% of Germans unhappy with Scholz’s performance, he needed to increase his political legitimacy by supporting German households and businesses at all costs, even at the cost of ignoring the consequences this could have at the EU level.

The fallout from the announcement of the energy package reflected not only the tension between Germany’s internal political dynamics and the responsibility it bears as the “de facto” leader of the EU, but also an ideological divide -South on how to deal with economic crises. While the South pushes for more economic integration and solidarity, the North is reluctant to pay for what it sees as economic mismanagement by the South.

In a column criticizing the German energy package, European Commissioner for the Economy Paolo Gentiloni and Commissioner for Competition Thierry Breton stressed the importance of creating a European plan to deal with the energy crisis and avoid a race for energy subsidies. state, which would fragment and undermine the single market. . According to them, to help member states cope with rising energy prices, the EU should adopt a new SURE plan, a financial instrument applied during the pandemic to support national interventions against unemployment.

However, countries in the North, such as the Netherlands, see the idea of ​​a European fund as anti-competitive and dangerous. According to her, this could open the door to a pooling of national debt at EU level. In other words, the Netherlands does not want to share its repayment obligations with countries like Italy, whose national debt is close to 150% of its GDP.

What is clear to everyone, however, is that if internal tensions over the energy crisis escalate, it will play into Russia’s Vladimir Putin’s hands. Already, Hungary, which opposes EU sanctions against Moscow, has struck special deals with Russian energy giant Gazprom to defer gas payments for the next six months, if the price rises above a certain threshold.

This agreement would not only help Budapest through the winter, but it could also set a dangerous precedent. This could encourage other EU states to strike energy deals with Russia and thus undermine European unity over the sanctions regime.

Although the German package has caused friction with other EU members, it may have an upside. It appears to have caused anxiety that has pushed EU states to take the search for a common solution more seriously.

There seems to be a realization that allowing divisions to grow and delaying a common economic response could lead to higher costs for everyone, both in terms of economic loss and geopolitical insecurity.

This became clear during the working session of the European Council on 20 and 21 October. As EU Council President Charles Michel noted, EU member countries have demonstrated “a strong and unanimous commitment to act together”.

Among the measures discussed were energy conservation strategies, bulk gas purchases, a temporary cap on gas prices in power generation and a temporary dynamic price corridor on natural gas transactions.

In addition, EU states have agreed on the need to encourage energy solidarity measures and to mobilize all relevant tools at national and European level to protect Europeans from the crisis. Although they did not clearly refer to the creation of a European energy fund, they left room to discuss it again.

The European Commission must present concrete plans to implement the above proposals and another European Council is likely to be held to take them forward.

Meanwhile, Elisa Ferreira, the European Commissioner for Cohesion and Reforms, also announced plans to allow member states to redirect up to 40 billion euros ($39 billion) under the policy of cohesion 2014-2020 to help households, small and medium-sized enterprises and even large industries. struggling with high energy prices. It may not be a mutual fund, but it’s a step in the right direction.

Now may also be the time for Germany to stop feeling uncomfortable with its leadership role in the EU and recognize that it has enough political and economic power to lead the way. development of a common policy on the energy crisis. It can demonstrate its commitment to European unity by becoming a bridge between North and South and advocating a more integrated, politically strategic and economically advantageous approach.

A lack of agreement within the EU would lead to higher gas prices, which would not only worsen the expected recession, but also give Putin even more energy revenue to fund his war in Ukraine. In other words, it would be a major European political and economic failure that even Germany cannot afford.

The opinions expressed in this article are those of the author and do not necessarily reflect the editorial position of Al Jazeera.

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