The EU is rightly considering ways and means of cushioning the consequences of skyrocketing energy prices. Massive market interventions are now also becoming apparent. Europeans must use them cautiously as an absolute exception with a strict time limit.
It was outright impertinent that Vladimir Putin of all people, ruler of a corrupt system of favoritism, recently warned the EU to abide by the rules of the market economy.
As usual, the Kremlin despot combined this with a threatening backdrop: If the EU states agree on a price cap for Russian gas supplies, he will turn off the tap completely.
He shall. According to Energy Minister Robert Habeck, gas from Russia only arrives in Germany in homeopathic doses anyway; the EU as a whole has reduced the Russian share of its gas imports from 40 percent six months ago to nine percent now.
In Brussels, Habeck called it “gigantically amazing” that Germany is now able “to get by without Russian gas”, even if production restrictions are “admitted”.
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The managing director of the German Chemical Industry Association (VCI), Wolfgang Große Entrup, illustrated what this means with a cry for help: “Many companies in the chemical-pharmaceutical industry have already exceeded their load limit and have to shut down their production.”
Instruments that are effective in the short term are needed to lower the high gas and electricity price level as quickly as possible. The economy calls for market intervention, which doesn’t happen that often.
The energy ministers of the EU did her a favor on Friday and instructed the EU Commission to work out their ideas on price caps for electricity and gas as well as a levy and redistribution of extreme profits in more detail in the next few days.
It was obvious to the Green Habeck that he was also quite uncomfortable. “We are doing something here that affects the heart of Europe’s energy supply,” he said, warning against destroying the market mechanism in this sector.
Despite the immense time pressure, the greatest value should be placed on diligence. “The key thing is that the markets work.” In the preliminary negotiations for the ministerial meeting, Germany had insisted that all emergency measures be limited in time.
But nobody knows how long Putin intends to continue raging in Ukraine and on the world markets for energy and grain. “We are experiencing hard times that will not be over any time soon,” said EU Commission President Ursula von der Leyen. With these prospects, provisional arrangements could become permanent arrangements.
Habeck sees this danger. He therefore advocated not repealing all market rules, but only providing a price cap for basic electricity and gas needs. The essentials would remain protected – everything beyond that would be sensitively more expensive.
The dilemma is: reduce prices – and still leave the market halfway intact. As far as it still works at all, doubts are quite appropriate. The discussion about it, according to Habeck, is more complex than the circulating buzzwords.
Two camps emerged among the energy ministers: supporters of massive general price caps and advocates of targeted compensatory grants for those affected who are overwhelmed by the high energy prices.
Czech Industry Minister Jozef Sikela, representing the current Czech EU Council Presidency, indicated that a new emergency meeting of ministers will be necessary very soon. There was also speculation in Brussels that there could be a special summit of heads of state and government on the energy crisis.
By the end of September, the emergency measures should be dry and dry. The speech by EU Commission President von der Leyen on the state of the Union, scheduled for Wednesday, will now play a key role. A strong signal with concrete underpinning is expected from her.
Jens Geier, head of the SPD deputies in the European Parliament, demanded “well thought-out market interventions”. A clear warning came from CSU economics expert Markus Ferber: “In a market economy, prices have an important steering effect.
An excess profit tax, which must not be called that, will certainly not solve the energy crisis and also has nothing to do with free market principles.”
In Brussels, however, German radical ideas are also in vogue, benefiting from the current need and uncertainty. “Energy companies should be socialized,” demanded Martin Schirdewan, co-chairman of the Left Party in the European Parliament.
The level of suffering is growing, the EU member states have already introduced a large number of compensatory measures for their citizens on their own initiative, and the calls for even more state aid are getting louder and louder. The European Economic and Social Committee speaks of the now “unbearable” burden on private households and the economy caused by energy prices.
The EU Commission has promised to get Europeans through the winter “safely and affordably”. Apparently there are no longer any bans on thinking about this; the high tolerance for state intervention suggests that we are moving from a market economy to a managed war economy.
It starts with the price of electricity, with the price of bread rolls and cooking oil it may go further once you get started. We already had a tank discount. Putin’s war demands financial sacrifices from us in everyday life.
In a social market economy, the state cannot relieve everyone, only the weakest. Targeted support for low-income groups is preferable to general price caps if we want to stick to a market economy model.
Normal earners who have been hit hard can only grit their teeth for the time being. But freedom should be worth something to us. Ukrainians pay the ultimate price for this every day – in blood. This hint is tried as often as it is still correct.
The courage to make sacrifices is a word that is not often heard in our societies. It reaches its just limits where crisis profiteers fill their pockets with the misery of others. State intervention is absolutely necessary here – in doses. But we don’t need to slip into the planned economy.
A comprehensive reform of the EU electricity market is necessary in the medium to long term, in particular the decoupling of the price of electricity from that of gas. The EU is only at the beginning here. Habeck rightly warned his ministerial colleagues in Brussels: “Preparing for the winter should always be linked to planning for the future.”
