Emmanuel Macron measures perfectly how complicated the task promises to be at the start of this European Council (Thursday and Friday) with an electric atmosphere. The 27 are divided on how to reduce the price of gas and electricity as quickly and efficiently as possible.
The energy situation and concerns are not the same depending on the country. France defends the “Iberian mechanism” because it would be one of the big winners. But this mechanism only concerns the so-called generator gas, that which is consumed to produce electricity. Italy, Greece, Belgium and Poland are much more concerned by the gas which directly supplies their industries. These three countries are therefore ardently demanding a cap on the price of gas in general, directly from suppliers: the United States, Norway, etc.
No question for Germany, for whom the concern lies less in the price (it has the means to pay) than in the security of supply. Any attempt to cap the price of gas from international suppliers is perceived as dangerous, even if the price cap is limited to gas transported by pipeline (more difficult for the supplier to redirect). We find ourselves in the following position: France, Spain, Portugal, Sweden, the Baltic countries and Romania want the “Iberian mechanism” to be extended to the whole of the EU. Belgium, Italy and Poland have nothing against it, but on condition of obtaining a general cap on gas prices.
Olaf Scholz’s objections
Negotiations prior to the European Council have nevertheless made it possible to make slight progress. France fought for the conclusions to hasten the decisions. In the draft conclusion, the European Commission was originally asked to “study” the Iberian mechanism. This postpones the decision to the December European Council. On Wednesday, the text changed: now the Commission is asked to “propose” the Iberian mechanism. So we moved on to the next step.
READ ALSOGas price ceiling: France tries to convince Germany
This is more in line with reality because the Commission has, in fact, already spent days studying the consequences of extending the Iberian mechanism to the whole of the EU and fending off German objections. Chancellor Olaf Scholz raises three: by sponsoring “cheap” gas (everything is relative), the Iberian mechanism risks encouraging gas consumption and leading, in the long run, to a rise in prices, thus canceling the initial benefits of the system; the Iberian mechanism will experience “leaks”, namely that it will unduly benefit the United Kingdom, Switzerland and Norway, which will buy cheap gas in Europe paid for by European taxpayers; the Iberian mechanism will benefit the EU countries unequally, the States least dependent on gas to produce their electricity doing better than the others, and among these, France…
The Commission has dealt with the problems
“So the system benefits everyone, but the Germans don’t want it to benefit third countries or for other countries to benefit more than them”, summarizes a diplomat. The German objections do not hold on the increase in consumption. It is a fact that in Spain, the country that has been experimenting with this system since the summer, gas consumption has increased. But the analysis of the causes of this increase is not linked to the mechanism: in fact, the drought reduced the hydraulic sources in Spain, which had to resort to more gas to produce its electricity. Second cause: France (especially in the South-West) took advantage of this cheap gas, which resulted in increased consumption. “On this second reason, Spain does not brag too much because it claims that the gas connections between Spain and France are too weak in order to defend the construction of MidCat, an additional gas pipeline with a higher throughput”, note- we in Paris. There was, in fact, a “flight” from the Iberian system to France…
READ ALSOEurope’s plan to do without Russian gas
If all of Europe switches to the Iberian system, the problem of “leakage” no longer exists between Europeans, but affects third countries connected (United Kingdom, Switzerland, Norway). “But the Commission has a solution. We know how to deal with a system of locks. This is not a real problem,” objects French diplomacy.
An equalization between the big winners and the small winners
Finally, it is true that the Iberian mechanism will benefit some more than others within the EU. Here too, the solution has been studied by the Commission: it suffices to establish an equalization mechanism so that everyone benefits in roughly the same proportions.
Of course, it is not for European leaders gathered in Brussels to go into this kind of detail. This is the role of the energy ministers, who will meet on Tuesday 25 October. Nevertheless, the European Council must send a clear signal: the Commission must get down to business. Ursula von der Leyen, the President of the Commission, has not dared, so far, to put specific proposals on the table, counting on Emmanuel Macron and Olaf Scholz to resolve their dispute.
Breton and Gentiloni push for a new budgetary instrument
Another subject of debate: is there finally a need for a coordinated European response to the problems of business competitiveness? Commissioners Thierry Breton, in charge of the internal market, and Paolo Gentiloni, in charge of economic affairs, are very worried about the economic consequences of this energy crisis. They sounded the alarm bell. Some EU states will not have the means to go into debt to support their SMEs. The risk of bankruptcy, relocation or takeover of SMEs by American or Chinese funds is palpable. However, this is not the option chosen by President von der Leyen, who proposes to increase the RePowerUE plan.
READ ALSOThe energy charter, a ticking time bomb of the “Green Deal”
“It has the wrong object,” objected some within the Commission. RePowerUE is money to invest in wind power, solar energy, thermal renovation of buildings… Weakened companies do not need the investment immediately. Today, we are talking about cash flow problems, liquidity. RePowerUE is not the answer to the immediate crisis. Breton and Gentiloni push for an instrument which allows the weakest States to borrow from the Commission, at low rates, the Commission itself going to seek this financing on the markets, the signature of the Commission being much better. It will thus be able to lend to the weakest States at attractive rates that they themselves could not contract on the markets. But unlike the European recovery plan, the borrowing States would be the only ones to have to repay, without a solidarity clause on the part of the others. This is enough, in principle, to reassure the Germans, who would not have to pay in the event of default.
Viktor Orban, a solo player
This community solution is not, for the moment, envisaged in Berlin. Germany has the means to hold on, on its own, with its 200 billion euro support plan. But what if its customers and suppliers in neighboring countries are weakened? Eventually, Germany will be overtaken by the crisis and the Chinese market will close. The interdependence of European economies requires, as at the time of the pandemic, a common response. Angela Merkel had come to understand this. All the work of conviction must be resumed with the Scholz government. But this time, three key men must be convinced: the chancellor himself, whose national reflexes are quite strong; its Vice-Chancellor in charge of Climate, Robert Habeck; and Liberal Finance Minister Christian Lindner. With the latter, it is far from over. “I don’t see the point of a new European budgetary instrument, he has just declared. The situation is very different from that of the pandemic. Let’s make the best use of existing tools. »
The European Council will also have to face the solitary game of Hungarian Viktor Orban. The Hungarian Prime Minister criticizes the sanctions, considering that they cause more damage to Europe than to Russia. He organized, in Hungary, a national consultation on European sanctions with 8 million households with 7 questions, as usual, very focused. He is also not in favor of one of the Commission’s proposals: allowing companies to buy gas in common to replenish stocks for the winter of 2023-2024. “Brussels’ latest plan on joint gas supply reminds me of the time we bought vaccines together. Slow and expensive. I expect a huge debate at the next European Council, ”he warns in a tweet, posted on Wednesday.