EU states increase pressure on Germany and von der Leyen

Brussels, Prague The pressure on Germany and the EU Commission is increasing to agree to an EU-wide gas price cap. The heads of state and government will discuss this in Prague this Friday. On Thursday, several of them were dissatisfied with the previous decisions.

In a letter to the group, Commission President Ursula von der Leyen presented a “roadmap for further measures”. However, in this she once again dodged the specific demands with which a majority of the states started the negotiations. Ministers from 15 of the 27 EU countries are calling for a cap on wholesale gas prices. Her proposal amounts to allowing gas suppliers from outside the EU to charge less, which would benefit gas customers in Europe.

Although von der Leyen is now open to “price restrictions”, he definitely does not want to force a lower purchase price on the world market. “If the EU caps import prices, suppliers could lose confidence in their European customers,” says Philipp Lausberg from the European Policy Centre. “Germany also wants to avoid that at all costs.”

The Austrian gas expert Walter Boltz, on the other hand, sees governments as responsible if gas customers are to be spared: “A limited price can only be achieved through subsidies,” he says.

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Some European countries have already capped gas prices. Introducing a cap at European level could relieve their own budgets because then all states would have to pay for it together. “Subsidies are toxic, especially when interest rates are high,” says Lausberg. “That’s why indebted countries are happy when the burden is shared among all.”

German plans cause criticism

Germany is one of the opponents of such a proposal and would probably have to pay disproportionately much for it. However, many Europeans sharply criticize the fact that Berlin is using its financial strength solely to relieve the burden on its own economy and citizens.

“The problem is that each country puts together its own package,” said Estonian Prime Minister Kaja Kallas. “We have to tackle the problem structurally, otherwise the countries that have more money can spend more money, which damages the internal market.”

Kaya Kallas

The Estonian Prime Minister calls for a joint approach to the energy crisis.

(Photo: Reuters)

Her Latvian colleague Krisjanis Karins said that because the German economy is so big, such aid could have a distorting effect. “The bigger the economy of a country, the greater the responsibility,” he said in direction of Berlin. “We must work together to keep competition between member states balanced.”

>> Read here: The EU Commission is campaigning for European gas price caps

EU Internal Market Commissioner Thierry Breton announced that he would examine the German gas price brake for possible distortion of competition. Competition Commissioner Margrethe Vestager called for “a common and coordinated response that does not endanger Europe’s fundamental strength: our single market”.

Gas price cap would not be an incentive to save

However, compared to the interventions discussed at EU level, the German measures have the advantage that they distort the price signal for gas less. In Germany, only a basic requirement for gas is to be subsidized, so the incentive to save is largely retained.

A gas price cap, on the other hand, would almost inevitably lead to higher consumption. “Reducing the price of gas is difficult to reconcile with the goal of saving gas,” says Lausberg. “None of the various options is therefore optimal.”

Accordingly, von der Leyen is linking its offer of a gas price cap to new savings targets and binding solidarity agreements that are intended to ensure gas deliveries between EU countries even in the event of a gas shortage. Both have been proposed several times, but always rejected. To date, Germany has no solidarity agreements with the Netherlands, Belgium and France through which it obtains LNG.

>> Read here: How the gas price cap could work

Another obstacle for the Commission would be the implementation of a gas price cap. “Monitoring and regulating import prices is an incredibly complex thing,” says Boltz. “There is no institution that could do that right away.”

Time is ticking for the Commission at the moment, because since the gas storage facilities have been almost full, the price of gas has also fallen significantly again. If it stays that way, the pressure on the Commission to introduce untested measures would probably decrease again.

More: How expensive will the gas price cap be? Economists disagree with SPD estimate

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