European Union Leaders Battle Soaring Energy Prices After Green Policy Fiasco

This week, the European Union’s (EU) leaders enter a critical period in which they must ensure that soaring energy prices and dwindling supplies do not further devastate their struggling economies and incite discontent.

In addition, all 27 members must remain unified in their opposition to Russian President Vladimir Putin.

Before the start of a crucial summit on Thursday, the EU’s executive Commission will present a plan on Tuesday that must bridge the gap between those who want to impose a common gas price cap to keep prices low and those who believe it would primarily restrict supplies, further starving industries and businesses.

The EU leaders will then seek a consensus during two discussions over the weekend, regardless of how difficult that may be.

In his invitation letter, EU Council President Charles Michel outlined three courses of action: decreasing demand, ensuring supply security, and controlling prices.

“This is the week of truth for Europe,” declared Belgian Prime Minister Alexander De Croo. This week has been a mixed bag.

EU member states quickly realized that the bloc’s reliance on Russian energy was an enormous political blunder. They figured it out practically immediately after Putin invaded Ukraine on February 24. As a result of sanctions imposed on Russia’s energy sector, the prosperous bloc of 450 million has struggled to prevent cold temperatures from infiltrating the homes of the poorest and the closure of companies due to a lack of inexpensive electricity.

Right-Wong Nationalism Growing in the European Union

With nationalists and right-wing populists increasingly grumbling about the EU’s shared approach, the ability to establish a joint strategy from the crisis could have a significant impact on the future of the bloc.

According to Pawel Zerka of the European Council on Foreign Relations, the upcoming winter might freeze and fracture European sentiment – the common sense of belonging, mutual trust among European countries, and citizens’ emotional attachment to the concept of Europe.

Even De Croo, the leader of one of the states that embrace the European Union the most, recognizes there is no more time to dither. “The time for justifications is over. In this energy conflict, if the European Union still wants to be relevant, contain energy prices, and better protect families and companies, it must deliver,” he said.

In recent weeks, De Croo has exerted significant pressure on the European Union Commission to cap the cost of all EU gas imports, with Poland and Greece also upping the pressure.

The bloc’s executive arm was scheduled to present a plan to address the shortfalls on Tuesday. Not an easy assignment, given the fundamental differences between powerhouse Germany, which opposes a full gas price cap, and those who are certain that such a cap will not lead to a decrease in market supply.

EU Being Held Hostage By Putin

The Commission is anticipated to propose a solution that would allow for a temporary corrective mechanism to be activated in extraordinary circumstances and the introduction of a new LNG gas index that more accurately reflects the market in the wake of Russia’s significant reduction of pipeline gas imports.

Earlier this month, the International Energy Agency stated that “Europe’s gas supply security is under an unprecedented threat as Russia strengthens its use of natural gas supplies as a political weapon.”

While gas stockpiling is in full swing and reliance on Russian supply has decreased to less than 10 percent, threats remain.

“A complete cessation of Russian gas deliveries cannot be ruled out before the 2022/23 heating season when the European gas infrastructure is at its most vulnerable,” the IEA stated.

And the energy crisis is tearing apart the social fabric of Europe. According to the European trade union organization ETUC, salaries adjusted for inflation have decreased by as much as 9 percent in every EU member state this year. It was reported that business profits in Romania increased, sometimes by as much as 6.5%.

“People are going hungry and must forego recreational activities. According to EU legislator Manon Aubry, families must choose between refuelling their vehicles and putting on the heat.

Natural Gas Pool System

In light of the potential for societal unrest, European Union leaders are expected to agree on a system to pool gas purchases to prevent member states from competing against one another to increase reserves and drive up total energy prices.

To combat the possibility of corporate failures and industrial decline, EU governments have begun separately supporting threatened industries, notwithstanding the potential for market distortion.

If a wealthy member state can invest billions of euros in the industry while a poorer member state must scrape by and watch enviously, the concept of the EU’s common market is at risk.

Many have criticized Germany’s intention to invest 200 billion euros in subsidizing its industry through the next two winters. However, keeping the wheels of German industry turning could also benefit all.

“Typically, what is good for Germany is also beneficial for us,” stated De Croo.

The Associated Press