Germany’s €200bn energy support plan sparks ‘animosity’ in EU

Germany’s pursuit of a massive borrowing program to help its economy weather the energy crisis has heightened tensions between EU member states as they struggle to forge a common approach on falling gas and electricity prices at meetings in Brussels.

The €200 billion plan, announced by Berlin on Thursday, was described by German Chancellor Olaf Scholz as a “double ka-boom” that would help consumers in poor households as well as industry pay higher energy bills. higher this winter.

But the scale of the support and the timing of the announcement on the eve of an emergency meeting of energy ministers in Brussels on Friday prompted a backlash within the EU. Several diplomats have argued that Berlin’s use of its fiscal firepower as other capitals struggle to fund support clashes with efforts to forge a unified EU response against the militarization of EU exports. energy by Russia.

An EU diplomat said the German package had sparked “animosity” just as the bloc was trying to find a common approach to “tackle the problem at the root”. Berlin is also resisting the imposition of a gas price cap backed by more than half of EU member states.

On Friday, ministers agreed on three proposals to reduce electricity prices for consumers and businesses, including a mandatory 5% reduction in peak electricity consumption, a one-off tax on fossil fuel companies and a cap of €180/MWh on the price of electricity produced by non-gas-fired power producers whose revenues are higher than those recycled to consumers.

But after intense negotiations, there was no agreement on a gas price cap, which several member states, including Germany, fear will drive up demand and divert gas whose EU desperately needs other regions that are willing to pay more for supplies.

Mario Draghi, the outgoing Italian Prime Minister, said after Germany’s announcement that “in the face of the common threats of our times, we cannot divide ourselves according to the place in our national budgets”.

Guido Crosetto, one of the main advisers to Giorgia Meloni of the far-right Brothers of Italy party which won the largest share of the vote in the country’s recent elections, directly attacked the energy policy of Berlin. “It is an act, precise, deliberate, unagreed, unshared, uncommunicated, which undermines the reasons for the union,” he said.

The German plan has also raised questions within the European Commission.

Thierry Breton, European Commissioner for the Internal Market, said on Twitter that while Germany could afford to borrow 200 billion euros on the financial markets, some other EU member states could not do the same, because he called for particular attention to the implications for the european union. market.

“We need to think urgently about how to offer member states – who don’t have this fiscal space – the chance to support their industries and businesses,” he said.

Touted in Berlin as a “protective shield” for industry and households, Scholz’s €200 billion plan will be financed by new borrowing and channeled through the reactivated Economic Stabilization Fund, an off-budget facility that was set up in 2020 to help businesses survive the Covid -19 lockdowns.

Robert Habeck, Germany’s economy minister, defended the Berlin plan at the Brussels meeting, saying it responded to the need for European solidarity and stressing that other member states had already undertaken major interventions to reduce energy costs. “We are doing the same thing that other countries did a long time ago,” he said.

Karel Hirman, Slovak economy minister, said Germany was “destroying our common market”.

Hirman said the whole EU benefits from Slovak products such as fertilizers that rely on gas in the manufacturing process. “We don’t have the financial resources for these huge subsidies,” he told the Financial Times, adding that high energy prices could lead to the country’s economic collapse.

Claude Turmes, Luxembourg’s energy minister, on Friday called on the European Commission to update its state aid rules to stop “this mad rush by different governments to outdo other governments at such a time. difficult in Europe”. . . and let’s stop the quarrels between us.

Berlin’s opposition to a gas price cap, alongside the Netherlands and Denmark, has sparked frustration among 15 EU countries, including France, which wrote to the Commission this week asking to speed up work on such a measure.

Susanne Ungrad, spokeswoman for the economy ministry, said on Friday morning that Berlin did not support the idea of ​​a “hard price cap” because there was a risk that it might not be possible to buy enough gas on world markets, “which would be counterproductive”.

Germany has backed the EU’s idea of ​​forming a European consortium to buy gas on world markets, she added.

A senior EU diplomat said the timing of the German package had been seen as a ‘sign of intransigence’ but that Berlin should back the gas price cap because if the spending plan ‘was implemented alongside a cap prices, the cost to the German government would be halved by 100 billion euros”.

Additional reporting by Amy Kazmin in Rome and Guy Chazan in Berlin