EU role reversal as Germany feels the energy pinch

The European Union’s economic moralisers swapped roles this week as the 27 member states agreed to voluntarily reduce their use of gas by 15 per cent to try to avoid shortages this winter.

Ministers came to an unusually swift agreement. It probably helped that the pressure was hiked by Gazprom on the eve of the meeting, as the Russian energy giant announced a reduction in gas flow along the crucial Nord Stream 1 pipeline to just 20 per cent of capacity which kicked in on Wednesday.

But the EU deal was not reached before some member states took the opportunity to make a few pointed remarks.

“Unlike other countries, we Spaniards have not lived beyond our means from an energy point of view,” said Spain’s energy minister Teresa Ribera Rodríguez when the European Commission first proposed cutting gas use last week.

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Was she trolling? It seemed a clear reference to Germany and its decision to build reliance on Russian gas into its manufacturing sector despite many warnings of the geopolitical risk — something that now may bear consequences for the whole single market if shortages tip the EU’s largest economy into recession.

And it was done using the language once deployed against countries such as Spain and Ireland, as they were stigmatised as the “PIIGS” in the aftermath of the global economic crisis of 2008.

Spain has some cause to take the moral high ground now. A renewable energy frontrunner in Europe, it produced almost half of its electricity from renewables last year.

Those criticising the plan were “the very countries that felt the full brunt of inflexible German fiscal rectitude during the euro zone crisis a decade ago”, noted Politico’s Suzanne Lynch. “Having lectured indebted nations about the need to live within their means, Germany is now the country with some explaining to do as it seeks to reverse its over-reliance on Russian gas.”

Will a European gas crunch affect Ireland?

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David Carretta, a correspondent in Brussels for the Italian newspaper Il Foglio, described it as a reversal of “moral hazard” — the scenario in economics in which an actor is emboldened to take on more risk because it is not bearing the full costs.

“Moral hazard” was the accusation that Germany itself levelled against Greece and other southern countries during the euro zone sovereign debt crisis,” wrote Carretta.

“Protected by the low-interest rates that were guaranteed by membership of the euro, the various governments of Athens, Rome, Madrid and Lisbon let public spending soar, regardless of the consequences,” he recalled. “With the governments of Gerhard Schröder and Angela Merkel, Germany did the same thing with Russia on the energy front.”

Here is Merkel explaining why she remained committed to this position in 2019, despite widespread warnings.

“Naturally, we cannot do without baseload energy. Natural gas will therefore play a greater role for another few decades. The dispute about where our natural gas comes from is thus a bit over the top,” the then chancellor told an audience in Davos.

“It’s perfectly clear that we’ll continue to obtain natural gas from Russia,” she continued. “If we phase out coal and nuclear energy then we have to be honest and tell people that we’ll need more natural gas. What’s more, energy has to be affordable.”

Berlin was aware at that point that Russia had repeatedly cut gas supplies during political disputes. The German government must have assumed it wouldn’t happen to them.

Over the course of a week the Czech presidency of the EU managed to broker a compromise that allowed for various opt-outs and derogations, including one that exempted Ireland from mandatory reductions as one of three island states not directly connected to the EU grid.

The tweaks to allow for national circumstances and ensure the control of member states over whether an EU shortage “alert” is triggered was enough to win support — even of Spain.

Ribera Rodríguez took a conciliatory tone as she entered the council. “The question is not where the policy mistakes may be,” she said. “But how to respond to a very important challenge.”

Minister for the Environment Eamon Ryan too was asked whether he felt it was fair that Ireland was being “asked to show solidarity with Germany” when the reverse was lacking in the past.

“I don’t think there’s an equivalence. I was involved, we were in government at that time, I know what it was like,” he said.

“But if we get caught up in looking back that won’t solve this problem. We have to look forward — how we all get through this winter. That makes the case for solidarity, no matter what happened in the past.”