VDL caves to pressure from France and Italy in U-turn against Germany

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The European Union should put in place a temporary price cap on natural gas until a new price index can be introduced, European Commission President Ursula von der Leyen told the European Parliament on Wednesday. She said: “Introducing a cap on gas overall is a temporary solution until we will have a new EU price index developed that ensures a better functioning of the market and the Commission has already started to work on this.” 

The move comes as a U-turn from Brussels after weeks of calls by some member states to impose a gas price cap on all gas trade with Russia were ignored by the executive.

Brussels had warned that such a measure would pose risks to Europe’s energy security and disrupt gas flows between EU countries.

Germany, Europe’s biggest gas buyer, and the Netherlands are among those opposed.

In a move aimed at allowing disagreeing member states to come to a mutual solution, the Commission chief said Brussels is considering versions of a gas price cap including one targeting gas used in power generation and a temporary “flexible” limit on prices.

European Union countries are at odds over whether to cap gas prices in an attempt to pull down soaring inflation, with their government leaders set to spar over the idea at a meeting on Friday.

On Tuesday, EU energy commissioner Kadri Simson said Brussels’ next move would be guided by the outcome of this meeting, but that the Commission was looking at multiple options to contain gas prices, which have surged as a result of plummeting supply from Russia.

Ms Simson told a European Parliament committee meeting, referring to the Dutch Title Transfer Facility gas price: “One way forward would be to consider a flexible pricing limitation in relation to the TTF in a way that continues to secure the supply of gas, notably LNG, to Europe.” 

Such a measure would be temporary, while the EU works on an alternative benchmark price to the TTF, she said.

She said another option could be to launch an EU “framework” for a price cap on gas used to generate electricity, alongside measures to ensure gas demand does not rise as a result. 

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Russia has slashed gas deliveries to Europe since its February invasion of Ukraine, with Moscow blaming the cuts on Western sanctions imposed in response to the invasion.

Since then, the EU has agreed emergency laws to fill gas storage, gas demand cuts that would become mandatory in a supply crunch, and windfall profit levies to raise money to help consumers with bills. But with gas prices still sky-high, many EU countries say those measures do not go far enough.

Draft conclusions for Friday’s EU leaders’ summit would have asked the Commission to propose “workable solutions” to reduce gas prices through a cap.

It comes as two top European Union officials on Tuesday called for joint borrowing to help the 27-nation bloc navigate the energy crunch together, after Germany faced criticism for going its own way with huge subsidies its peers could never afford.

Berlin raised eyebrows by announcing a massive €200 billion support package for its businesses and households, dwarfing aid announced by other major EU economies – €67 billion in the case of France, and €68 billion in Italy.

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One EU diplomat said: “It’s good to look more at the German state aid while discussing the EU price cap. They owe us here. Either the cap, or something sensible on joint gas purchases or on shared financing.”

On Tuesday two of von der Leyen’s team – European Economic Commissioner Paolo Gentiloni and Internal Market Commissioner Thierry Breton – said new joint borrowing could follow the model of shared debt issued in the pandemic to subsidise jobs.

“It is more important than ever that we avoid fragmenting the internal market, setting up a race for subsidies and calling into question the principles of solidarity and unity that underpin our European project,” the two wrote in an op-ed in the Irish Times.

“There is only one possible response: that of a Europe of solidarity. In order to overcome the fault lines caused by the different margins of manoeuvre of national budgets, we must think about mutualised tools at the European level.”

As a model, they pointed to the bloc’s pandemic jobs scheme SURE, under which the EU jointly borrowed €100 billion at very low cost and lent the money – rather than handing it out for free – to governments to save jobs.

France sided with that, saying a shared EU economic response was needed. But Germany quickly reiterated its opposition to sharing debt, saying that would not in the long run help competitiveness or financial sustainability of countries.

Denmark and the Netherlands are also strongly against joint debt, as they had been during 2020 negotiations on EU stimulus to lift economies from the COVID malaise.



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