Ukraine war: Europe experiments with price controls

Ursula von der Leyen at the EU summit in Versailles

The President of the EU Commission is thinking about price controls for energy.

(Photo: AP)

Berlin As the old saying goes, necessity is the mother of invention. Great need even breaks taboos. The EU Commission is now considering capping electricity prices in Europe in order to get a grip on the energy costs, which have risen sharply as a result of the war in Ukraine.

The fact that the head of the commission, Ursula von der Leyen, is a member of Ludwig Erhard’s party and pulls the instrument of price controls, which market liberals often condemn as the devil’s stuff, from the economic archives, not only shows how great the need is now. It also reveals that politics cannot alleviate supply-side bottlenecks in the short term.

The two economists Sebastian Dullien from the Institute for Macroeconomics and Business Cycle Research (IMK) and Isabella M. Weber from the University of Massachusetts recently proposed a gas price cap for basic needs. “With a gas price cap, the measured inflation would also be significantly lower,” tweeted Dullien – and received clear criticism from colleagues for this.

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