EU leaders clash over how to tackle energy prices

EU leaders clashed Thursday over how to ride out Europe’s energy shock, with traditional partners France and Germany at loggerheads over imposing a cap on gas prices pushed skywards by the war in Ukraine.

The bloc’s 27 member states have been squabbling for months over measures to lower energy bills, and a Brussels summit began in a chilly mood.

Countries such as Italy are pushing hard for a swift and ambitious cap on prices, in the teeth of opposition from Germany, the EU’s biggest economy.

There is huge political pressure to act, with strikes and protests over the cost of living spreading across Europe — notably in France and Belgium — and businesses fearing bankruptcy.

A spokesman for Italian premier Mario Draghi said he had “emphasised the urgency of adopting measures which affect prices, such as the introduction of a price cap and a reform of the electricity market.

“He warned of the risk that the market fragments, which could have negative effects on European unity if the countries that have more fiscal space operate independently,” the official said, in a swipe at Germany.

Berlin risks finding itself isolated in the debate.

Several smaller economies are furious that the German government won’t back a gas cap and for going it alone in helping its citizens pay for high prices with a 200-billion-euro ($196-billion) spending bonanza.

– ‘Acted in solidarity’ –

German Chancellor Olaf Scholz shot back at his critics as he arrived at the talks, saying that it was “quite clear that Germany has acted in solidarity” with his EU partners.

But French President Emmanuel Macron warned against Berlin standing alone as the talks began.

“Our role is to do everything to ensure that there is European unity and that Germany is part of it,” Macron said. “I don’t think it’s good for Germany or for Europe if it isolates itself.”

On the table for leaders are proposals by the European Commission, the EU’s executive arm, which try to satisfy the diverging views.

But these ideas have already been dismissed as timid by those wanting a clear ceiling on gas prices.

The opposing camp — championed by Germany, but also Denmark and the Netherlands — warns that this would choke off supply or encourage consumption.

The push for a common approach has been further hampered by Franco-German discord, which burst into the open Wednesday when they delayed a regular meeting between cabinet ministers.

Breakthroughs are difficult when the EU’s biggest powers do not see eye to eye and Macron and Scholz met ahead of the summit in a bid to find common ground.

But France did not consult Berlin before agreeing with Spain and Portugal to junk a planned gas pipeline that Germany has been pushing for for years.

Leaders of the three countries met and “decided to abandon the MidCat project and instead create, as a matter of priority, a Green Energy Corridor connecting Portugal, Spain and France with the EU’s energy network.”

The MidCat a project that emerged a decade ago, called for an overland gas pipeline to be built to connect gas terminals in Spain and Portugal, across France, to European networks supplying Germany, among others.

In its place, they said, an underwater pipeline — called BarMar — would be laid from Barcelona in Spain to Marseille in France.

It will initially be used for natural gas but, over time, more and more for more climate-friendly hydrogen.

But the agreement released by Macron and his Spanish and Portuguese counterparts laid out no timetable for BarMar’s completion, and did not say how it would be funded, leaving experts sceptical.

– ‘No cap’ –

The European Commission’s proposals to tackle the broader energy crisis include an idea to allow joint purchases by the EU energy giants in order to command cheaper prices to replenish reserves.

Another proposal is to give the EU’s executive arm the power to establish a pricing “corridor” on Europe’s main gas index to intervene when prices get out of control.

The EU leaders were expected to haggle for hours over the commission’s proposals, with some countries seeking something much more far-reaching than what is on offer.

But Scholz on Thursday again rejected any attempt by the EU to cap prices on gas imports, saying it “carries the risk that producers will then sell their gas elsewhere.”

However, the German leader welcomed the European Commission’s proposal for joint purchases in the EU.

The leaders also heard from Ukraine’s President Volodymyr Zelensky, who spoke by videolink from Kyiv to denounce Russia’s recent missile attacks on power infrastructure.

“Russia’s leadership has given the order to turn the energy system itself into a battlefield,” he said. “The consequences of this are very dangerous, again for all of us in Europe.”