EU warns of energy crisis compounded by need for ‘right now’ solutions

(Bloomberg) — The European Union is drawing up a series of radical plans to tame skyrocketing energy prices and keep the lights on across the continent, but governments across the region will need to find common ground, and fast.

As the bloc’s energy ministers meet in Brussels on Friday, they seek to take the first political steps to prevent Russian President Vladimir Putin’s cutoff of natural gas supplies from disappearing coupons, blackouts or even social unrest. But as they try to stay together, governments must also make sure their emergency intervention doesn’t accidentally wreak havoc on energy markets and make things worse.

The challenge is to find solutions that can be applied across the region and still fit each of the 27 member states’ economies and national electricity systems, which are powered by different energy sources.

Czech Industry Minister Jozef Sikela said on Friday there was “no time to lose” in reaching a deal. “I expect the proposal in a few days and I want to have clarity at the end of the month,” he told reporters. “I’m already seeing points where I’m sure we’ll line up.”

Ahead of the emergency meeting in Brussels, diplomats are converging on some broad issues — the need to break the dependence of electricity prices on natural gas and help stimulate liquidity in the energy sector — but remain deeply divided over what exactly needs to be done and how. The deal is expected to take at least several weeks.

Europe may not be able to wait long.

“This is not the time to have major discussions on energy markets. We just need solutions right now,” said Marco Mensink, director general of the European chemical industry association Cefic. “The situation is very worrying — it’s about the future of industry in Europe. Companies are shutting down production as we speak, and at these prices they won’t reopen.”

Why Europe wants to change the way power is priced: QuickTake

Belgian Prime Minister Alexandre De Croix issued an even more dire warning, saying Europe could not afford a two-month debate.

“A few weeks like this and the European economy will grind to a halt. The recovery from this will be much more complicated than the intervention in natural gas markets today,” he said Thursday in an interview with Bloomberg News. “The danger of this is deindustrialization and the serious risk of fundamental social upheaval.”

EU economy risks ‘complete standstill’ in energy crisis, Belgium warns

Speed ​​has never been the EU’s strength. Even fast-track measures require at least two rounds of negotiations between government officials before they are approved by ministers, translated into the bloc’s 24 languages ​​and published.

And the block is just in the very early stages of drawing up plans. Detailed measures to limit the impact of the energy crisis have yet to be revealed. More will come after European Commission President Ursula von der Leyen delivers her annual address to the European Parliament on September 14 in Strasbourg, France.

Finnish Prime Minister Sanna Marin told parliament on Thursday that an agreement on the emergency plan would also need the participation of heads of government. EU leaders are scheduled to gather for an informal meeting in Prague on October 6-7, while another summit is planned in Brussels on October 20-21.

Friday’s meeting of energy ministers will be the first chance for EU member states to assess how far apart they are from each other on the biggest challenges.

‘It’s not easy’

“Talks will not be easy,” Romanian Energy Minister Virgil Popescu told Bloomberg. “We have our own proposals and we will put them on the table and discuss them. The Commission’s proposals are a good start, but we need to see where the other Member States are.”

Von der Leyen said earlier this week that the Commission would present a series of radical interventions in the energy market, including a levy on fossil fuel producers — based on pre-tax profit — and a cap on the excess revenue of companies that produce energy from sources other than natural gas. The idea is to redistribute profits to support consumers. But these can be difficult ideas for countries to come to a quick agreement on.

The EU is preparing to step in to ease liquidity pressures on energy markets

One step that may come together more quickly is a proposal to ease the growing pressure on energy markets caused by rising collateral requirements, with utilities facing unsustainable profit margins.

The EU also plans to discuss the idea of ​​mandatory targets to reduce energy use.

Fighting gases

There are some early warning signs of how difficult it will be for Europe to make painful choices to reach deals across the bloc. German Economy Minister Robert Habeck complained that neighboring Belgium, Luxembourg, the Netherlands and Poland are refusing to engage in “constructive negotiations” on more gas solidarity deals.

That could worsen Germany’s gas crisis “because an important building block of the EU’s gas crisis resilience in the form of bilateral agreements would not be available,” Hambeck said in a report seen by Bloomberg that he presented to the energy committee and climate of the Bundestag. late Wednesday in Berlin.

German anger boils over as countries ditch gas distribution deals

Despite challenges of this nature, leaders increasingly recognize that failure to act can cause social unrest and endanger their governments.

The average annual energy bill is already more than a month’s wages for low-wage workers in the majority of EU countries, the European Trade Union Confederation said earlier this week.

“I think we don’t have the space to say again, OK, we’re putting something in the text and then we’ll meet in two months,” De Croo said. “In two months, at these prices, I’m afraid it’s too late.”

(Updates with Sikela’s quote in the fourth paragraph)

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