Anger with Germany overshadows summit as EU leaders squabble over gas price cap

Divisions between member states over capping gas prices and tensions over Germany’s €200 billion shield were on full display on Friday (7 October) as EU leaders met in Prague for an informal summit to discuss the ongoing energy crisis.

While no decisions were expected, there were hopes that the informal discussion between EU leaders might lead to progress on the energy question, and prepare the ground for a finalised deal at their regular EU summit on 20-21 October.

But divisions were on full display even before leaders started discussing how to lower energy bills and guarantee winter gas supplies.

Before the summit, a majority of EU countries asked Brussels to propose a cap on wholesale gas prices. However, EU capitals disagree on how such a cap would be implemented, with some still hesitant about introducing one at all.

Germany, Denmark and the Netherlands oppose a cap, worried it would make it difficult to buy gas on tight global markets and dampen incentives to reduce consumption.

The European Commission had also been reluctant to cap gas prices, citing similar concerns, but caved to pressure, sending ideas for a price cap on imports and a cap on gas used in electricity production ahead of the summit.

Meanwhile, four countries – Poland, Greece, Italy and Belgium – have put forward an alternative proposal for a “dynamic price corridor” that would limit volatility in the gas market by preventing the price from rising or falling beyond a certain level.

The corridor would address concerns over Europe’s competitiveness in global gas markets by allowing some purchases above the price ceiling.

“We need market intervention because we can’t pay these prices anymore,” Belgium’s Prime Minister Alexander De Croo said, adding that support for some sort of cap had risen from three countries in March to 24 countries now.

Ireland’s Taoiseach, Micheal Martin, said that “lots of work needed to be done” before an agreement can be reached. Meanwhile, Italy’s outgoing Prime Minister Mario Draghi was more optimistic, saying that “things are moving”.

The European Commission is also expected to continue talks with suppliers to lower gas prices and announce new funding under the REPowerEU plan to ditch Russian fossil fuels.

“We will be looking at additional funding on a European level so that all member states have the same opportunity to invest in the transition,” European Commission President Ursula von der Leyen told reporters in Prague.

Brussels will also present further steps to redesign the electricity market by the end of the year.

Brussels lays out further measures to tackle energy crisis

European Commission President Ursula von der Leyen sent a letter to EU capitals on Wednesday (5 October) explaining further measures it plans to tackle the energy crisis, including price caps on gas and further funding under REPowerEU.

Anger with Germany

The meeting of EU leaders was overshadowed by discontent over Germany’s controversial €200 billion support package for companies. Reactions ranged from irritation to outrage, showing a deep divide between Berlin and those in the EU who want more solidarity.

Poland accused Germany of “destroying” the EU’s internal market by subsidising its own businesses while opposing a pan-European cap on gas prices.

“The richest country, the most powerful EU country is trying to use this crisis to gain a competitive advantage for their businesses on the single market. This is not fair, this is not how the single market should work,” Polish Prime Minister Mateusz Morawiecki said.

“German selfishness must be put away in the cupboard,” he added, repeating concerns about a fiscal divide separating wealthy countries that can afford to spend heavily on domestic subsidies and those that cannot.

Meanwhile, De Croo hit out, saying: “We can’t solve everything with subsidies. Such large [support] packages are not needed anymore.”

Later, German Chancellor Olaf Scholz said that the informal talks in Prague cleared up “misunderstandings” about Berlin’s package, which he defended as the right thing to do, adding that France, the Netherlands and others have support measures in place.

EU prepares for winter

With EU gas storages 90% full, European Commission President Ursula von der Leyen said the bloc was well-prepared for winter.

“We have the first line of protection for our market. Now it is time to discuss how we can limit the peaks in energy prices and the manipulation of energy prices by Putin,” she added.

Now of concern is whether the EU will be able to refill these storages by the winter of 2023, which could prove even trickier than filling up for this winter.

EU countries have already agreed on demand reduction targets for electricity and gas and will be free to choose the appropriate measures to meet these, including public information campaigns and auctioning tenders for energy saved.

But EU price caps could require more reductions in consumption. Market experts have criticised the idea, saying they can be inefficient as they benefit those who do not need them and that they remove the incentive for consumers to reduce gas demand.

Any cap “will need to go hand in hand with equivalent demand reduction programs,” market expert Bram Claeys told EURACTIV, but “we’re not seeing them” he warned on Twitter.

Meanwhile, European Council President Charles Michel said that there is “increasing support” for public procurement of energy supplies in order to ensure stocks are full when “that becomes necessary again”.

Zelenskyy wants more pressure on Russian energy

A major concern since the invasion of Ukraine has been that Europe’s reliance on Russian fossil fuels has been funding the war. Speaking to EU leaders via video connection, Ukraine’s President Volodymyr Zelenskyy called on Brussels to further isolate Russia’s energy sector.

“We must continue moving in this direction, the direction of pressure on the Russian energy sector, on this main source of income of the aggressor state,” Zelenskyy said.

The EU has already sanctioned Russian coal and oil and Zelenskyy’s comments come a day after the bloc imposed a fresh round of sanctions on Moscow.

Zelenskyy also reiterated Kyiv’s calls to ‘demilitarise’ Ukraine’s Zaporizhzhia nuclear power plant, Europe’s largest nuclear facility, which is in a region that Russia has announced as formally annexed.

Removing Russian military equipment and troops is “essential for nuclear safety” and for Ukraine to have enough electricity to export, he added.

[Edited by Nathalie Weatherald]

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