As the energy crisis worsens on the Old Continent, the cracks in European unity, previously barely visible, are beginning to appear in broad daylight. A new bone of contention has just emerged: the gigantic subsidy package announced by Germany – 200 billion euros – to protect its economy threatened by recession due to rising electricity prices.
It is pure unfair competition. Mario Draghi has openly criticized the Olaf Scholz government’s support for private companies. “We cannot divide ourselves according to the room for maneuver of our national budgets,” said the acting Italian Prime Minister.
Calling for “avoiding dangerous and unjustified distortions of the internal market,” Draghi highlighted a problem that will increase in the coming months. Richer and less indebted countries, such as Germany, have more resources at their disposal than Central and Eastern European states, or over-indebted countries, such as Italy, Greece and Spain.
Thierry Breton also said that the German plan should be “examined in detail” and its “impact on the level playing field in the internal market” should be assessed. The European Commissioner for the Internal Market called for business support “to be done in a very transparent way, in consultation and with European coherence.”
The German announcement came on the eve of a meeting of European energy ministers, when Berlin is blocking one of the key measures advocated by other European governments: the introduction of a maximum price for gas. The Scholz government fears that such a cap would lead to gas shortages. Especially since one in ten German manufacturers has already reduced production due to energy prices.
This internal battle among Europeans casts a shadow over the future of the Union. On Friday, the EU-27 agreed on unprecedented measures that would have been unimaginable just a few weeks ago: each Member State will have to take measures to reduce its electricity consumption by 5 percent at peak hours between December 1 and March 31. Member States will also have to recover part of the excessive profits made by some low-cost electricity producers (nuclear, coal, renewables).
Profits generated when electricity is sold at more than 180 euros per megawatt-hour between December 1 and June 30 will have to be confiscated to finance consumer support measures, such as freezing retail prices.
The third measure is that the EU-27 will have to tax oil companies for their oil production and refining activities in Europe. A minimum rate of 33 percent will be applied to this year’s profits, which are considered excessive (profits 20 percent higher than the average of the last four years).
Estimates in Brussels are that the levies on electricity producers and oil companies will raise 140 billion euros, equivalent to 1 percent of the European Union’s GDP. This money should help countries to finance crisis measures such as the freezing of gas and electricity tariffs.
It is the milkmaid’s tale. They are not going to raise that much money, but even if they did, it would not be enough. The energy bill of the Old Continent is in the order of 6 percent of GDP over the next two years.