Germany’s eye-catching “energy shield” highlights division within the EU

  Articoli (Articles)
  Mehmetcan Karakoyun
  22 novembre 2022
  4 minuti, 46 secondi

Russia’s invasion of Ukraine followed by the sanction by the West forced Russia to play its hand which is curbing the gas supplies into the EU. That lead to higher gas prices and starkly revealed the EU’s dependency on Russian gas. Perhaps, among all the EU member states, Germany has suffered the most.

Germany, Europe’s biggest economy, introduced €200bn financial scheme to help citizens and business to reduce the damage as much as possible. The plan described by the Chancellor Olaf Scholz as a “defensive shield” aims at tackling increasing prices for gas and electricity costs. "Prices have to come down, so the government will do everything it can" - Scholz said in a press conference alongside Vice Chancellor Robert Habeck and Finance Minister Christian Lindner. According to the plans, to be operative until spring 2024, the government will introduce an emergency price brake on gas in addition to discarding a planned gas levy meant to help firms struggling with high spot market prices. This price break indicates the fall of sales tax on gas from 19% to 7%. Furthermore, Germany is also encouraging renewable energy and developing liquefied gas terminals. This package welcomed by industry groups and citizens; however, the story of external reflection is slightly different.

The scheme was unanticipated in Brussels and in other capitals mainly due to its enormous extent and its particular timing: just one day before, EU ministers met to endorse the first package of common energy measures to deal with the crisis. Officials understand the concerns of the Germany and country’s struggle to find an alternative to Russian gas. Nonetheless, they are worried that this grand financial scheme might trigger a negative spill-over effect beyond borders and distort competition in the single market. "Without a common European solution, we seriously risk fragmentation. So it is paramount that we preserve a level playing field for all" - said European Commission President Ursula von der Leyen.

Paolo Gentiloni, European Commissioner for the economy, and Thierry Breton, European Commissioner for the internal market, said they would review the plan. "The massive €200 billion aid plan decided by Germany (worth 5% of its GDP) responds to a need we recognise and have highlighted – to support the economy" - they wrote in a joint op-ed for the Irish Times. "But it also raises questions. How can EU countries that do not have the same fiscal space also support businesses and households?" Breton stressed that Commission will “carefully review” Germany’s plan and its potential impact on the EU’s level playing field.

Besides Ursula von der Leyen, Charles Michel, the President of the European Council, also highlighted the cooperation among the EU Member States. He warned against uncoordinated developments at the national level to support household and businesses in the face of the crisis without saliently indicating Germany’s controversial €200bn energy shield. Michel’s highlights the need for more European unity ahead of an EU summit on 20-21 October where leaders will discuss the EU’s response to the crisis in detail.

 Germany’s plan received criticism not only at the EU level, but also at the national level. Spain, Belgium, and Italy were among the countries that explicitly criticized the German government’s energy shield. Division between EU leaders in Prague were in full display. A meeting was overshadowed by discontent over the German plan, with reactions from irritation to outrage. While no decisions were expected, there were hopes that the informal discussion between EU leaders might lead to progress on the energy question, and prepare the ground for a finalised deal at their regular EU summit on 20-21 October.

Poland blamed Germany for destroying the EU’s internal market. “The richest country, the most powerful EU country is trying to use this crisis to gain a competitive advantage for their businesses on the single market. This is not fair, this is not how the single market should work” - Polish Prime Minister Mateusz Morawiecki said. German Chancellor Olaf Scholz stated that informal talks in Prague were fruitful to avoid misunderstandings about the Berlin’s package, which he defended as the right thing to do since France, the Netherlands and others also possess national support measures.

The showdown revealed the abysmal division between Berlin and those in the EU who do not possess financial means to tackle the soaring energy prices, hence demanding more solidarity at the EU level. Germany has faced substantial pressure in order to come to terms on joint debt issuance response to the crisis. These calls have so far been ruled out by Berlin, yet Chancellor Olaf Scholz stressed that he would be positive towards loans, not grants.

As it turned out, Germany has been accused of shifting its approach go-it-alone which worries the diplomats that Berlin’s debt financed spending spree will negatively affect inflation, increase the division between the rich and poor and favoring German companies will grant unfair advantage to them which is against the spirit of the EU’s common market. On the other hand, Germany has justified its measures as fair and proportionate, while opposing proposals for EU wide price caps or joint borrowing. Instead, if there is any country to blame, Germany blamed France whose failing nuclear power plants have added pressure to the European energy grid. Considering there is not a consensus yet and winter is approaching, there will surely be a lot more discussion among the EU leaders.

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Mehmetcan Karakoyun


Turkey Mondo Internazionale MI International Germany energy Energy policy European Union war Ukraine energy shield