EU frustration over Germany’s approach to energy crisis spills out into the open

In recent days, the growing frustrations of some European Union member states towards Germany — and the perception that the European Commission is overly influenced by the wishes of Berlin — spilled out into the open.

A diplomat was asked their thoughts about the commission’s performance as it drew up proposals on how to deal with Europe’s grave energy crisis.

The approach of the commission seemed to be “We try to make Germany very happy,” the diplomat said, letting out a bitter laugh.

When chancellor Olaf Scholz announced Germany would borrow €200 billion to pay for its own national gas cap, it was received like a cold shower

EU countries were troubled at why the commission had not drawn up a technical plan for the consideration of national governments on how the EU as a whole could introduce a cap on the price it pays for gas imports, the diplomat said.

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This was despite some 15 countries coming out in favour of the idea of a gas price cap publicly — a level of support that is usually sufficient for the commission to draw up a formal plan for the consideration of all 27.

The opposition of Berlin was blamed for this reticence. While national politics are a driving consideration for all member states, the question of what can pass muster in the German coalition sometimes seem to hang over proceedings in the EU like a silent, 28th veto.

[ Ireland in ‘war time’ situation as Taoiseach warns of shock gas price increases in January ]

So when chancellor Olaf Scholz announced that Germany would borrow €200 billion to pay for its own national gas cap and subsidise the bills of companies and households, it was received like a cold shower.

To critics, the approach of Germany seemed to be: first, to insist for years on pursuing a terrible energy policy that made it profoundly reliant on Russian gas in spite of all warnings, making it and the wider EU deeply economically vulnerable to the war.

Second, when the flaws of this policy were revealed by Russia cutting off gas supplies, to then use its financial heft to buy up gas from all available other sources, driving up the price for all. All this while blocking proposals from other member states for joint EU responses that would prevent poorer member states losing out at the expense of larger ones, including the idea of purchasing gas jointly or implementing an EU-wide price cap.

Northern fiscal hawks accused southern countries of trying to exploit the latest crisis to engineer another joint borrowing scheme

And finally, to introduce a national subsidy plan that other states cannot afford, ensuring that German businesses need not worry about high gas prices, and now have a competitive advantage over others in the EU.

For context, €200 billion is greater than the entire joint EU budget for all its programmes in 2023.

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Two senior European commissioners — the former Italian prime minister and EU economy chief Paolo Gentiloni and the influential French internal market commissioner Thierry Breton — intervened publicly in the debate in an opinion piece in this newspaper on Monday. Germany’s massive subsidy plan “raises questions”, they wrote. How can EU countries without such deep pockets support their households and businesses? How to avoid widening the economic gap between stronger and weaker ones, which are already under pressure as recession looms?

The answer is a “European budgetary response”, they wrote, “as we were able to do during the Covid crisis”.

This broke open the EU’s old fault lines over joint debt. Northern fiscal hawks accused southern countries of trying to exploit the latest crisis to engineer another joint borrowing scheme like the one agreed at the height of the Covid-19 pandemic — which was supposed to be a once-off — which they always fear will leave them on the hook for poorer countries’ debts.

[ Germany’s latest response to energy crisis raises questions ]

Mr Gentiloni told journalists his intention was “not to criticise this or that member state” but to argue for a repeat of the Sure programme, which provided cheap EU loans for member states to use for unemployment support schemes.

Behind the scenes, diplomats and officials say that there is more convergence on an agreement than the public sparring might suggest.

They hope that leaders will sort out their differences when they meet in Prague on Friday, and that a joint way forward will become clear. The details can then be worked up in time to be agreed politically when leaders meet again later this month, and finalised when finance ministers gather in early November.

While there is scepticism towards a new joint EU borrowing plan, that opposition is focused on borrowing that is given out in grants, and that is used to subsidise consumption.

The path forward could involve borrowing in the form of loans, that is given out for investments — to build resilient and green energy resources the EU can rely on for its future.