top of page
  • Ramzi Allen Alafandi

European Solidarity: Pooling Energy Purchasing Power

Last Monday, with Russian supplies operating at drastically reduced levels ahead of winter, Germany pushed to negotiate liquefied natural gas contracts (LNG) with Gulf producers while other European governments announced efforts to preserve energy. Earlier in the week the European Commission, responsible for the regulation of antitrust inside the European Union, stated conversations have begun with Germany over their energy support package. A group of 15 nations, including France, Italy, Spain, and Poland, have been pressing the Commission to place a price restriction on all wholesale gas transactions to help control rising costs.

This restriction will be in effect on a temporary basis until the EU comes up with a new benchmark for the cost of gas. Brussels asserts that a new index is required since the primary Title Transfer Facility (TTF) benchmark is dominated by pipeline supplies, and the market now comprises more liquefied natural gas. The Prime Minister of Greece, Kyriakos Mitsotakis, lauded the proposal as a tremendous breakthrough. In contrast, a high-ranking EU official expressed skepticism, noting that it would be difficult to design a solution that would be appropriate for the energy markets of all 27 EU members.

Von der Leyen suggested that the European Union (EU) should consider a price cap on the gas that is used to generate electricity. However, she emphasized that any price cap should be accompanied by stricter requirements to reduce gas demand in order to prevent an increase in gas consumption at a time when fuel is in limited supply. In addition, the EU ought to endeavor to negotiate a price corridor on gas imports from dependable suppliers, and to take into consideration new financing sources to ensure that all member nations can invest sufficiently to endure the energy crisis.

The European Commission has indicated that it is in the process of holding conversations with Germany on its stimulus plan of 200 billion euros. Critics are concerned that this would restrict competitiveness throughout the union. The package, which includes a gas price brake and reductions in the fuel sales tax, is intended to protect consumers as well as companies from the negative consequences of rising fuel costs.

A spokesperson has verified that the European Commission is having talks with the German administration, as well as with other national authorities, in order to maintain a level playing field and a single market, as well as to avoid negative subsidy races. The Commission oversees regulating competition policy throughout all 27 member states of the EU, and if state assistance is permissible. As a reaction to the German plan, Thierry Breton, the French EU commissioner for the internal market, stated that the EU needed to be alert to the fair playing field, and he questioned how much leeway other EU members had.

The strategy proposed by Germany significantly exceeds everything else that has been budgeted by the EU. The European Central Bank's (ECB) fight against inflation of 10% is made more difficult by the requirement that assistance measures be taken.

The Eurozone's finance ministers were due to meet in Luxembourg on Monday to ensure that national financial shields against growing energy costs would be brief and targeted.

The President of the European Commission's speech underlined how important it is to find a unified response to the present issue concerning the cost of energy rising across Europe.

6 views0 comments


bottom of page