France and Spain Call for Pan-European Response to Energy Price Surge, Reports Reuters

By Jan Strupczewski

LUXEMBOURG – France and Spain on Monday urged for a unified European response to the rising global energy prices, aiming to safeguard the most vulnerable citizens across Europe, ensure the competitiveness of businesses, and support the ambitious goal of reducing greenhouse gas emissions by 2050.

This appeal was made during discussions among euro zone finance ministers in Luxembourg, which aimed to complement the ongoing efforts of the European Commission to mitigate the impact of the soaring energy prices. The chairman of the meeting highlighted this collaboration.

Gas prices in the European Union reached unprecedented levels on Friday, largely due to Russia’s restricted supply, leading to concerns about the financial burden on consumers as winter approaches.

While the ministers recognized that the current inflation surge, driven chiefly by energy costs, is expected to be temporary and may ease in 2022, they acknowledged the need for vigilance and monitoring.

"We are witnessing an extraordinary surge in energy prices," stated Spanish Finance Minister Nadia Calvino upon arriving at the meetings. She emphasized the necessity for a collective European approach, noting that Spain had prepared a document outlining potential solutions.

One proposal from Spain involved creating a strategic European gas reserve to bolster the negotiating power of the 27-member bloc, comprising 450 million consumers. The document indicated, "We can and should enhance our bargaining power… This necessitates a centralized European platform for procurement, akin to our successful vaccine strategy, which should be applied to other critical areas."

Additionally, Spain advocated for curbing speculation in the market for CO2 emissions permits, which has been a factor in driving up prices. The document warned against a potential bubble in the EU Emissions Trading System, stating, "The EU ETS trading should not be accessible to all participants, particularly speculators wielding market influence."

HIGHER ENERGY PRICES AN ISSUE FOR YEARS, NOT MONTHS

French Finance Minister Bruno le Maire proposed improved regulation of European gas stocks and suggested decoupling electricity prices from gas prices, advocating for a model based on the average production costs across the EU.

"The advantage of the European energy market lies in its ability to secure energy supply throughout Europe. However, it also faces a significant drawback due to the alignment of electricity prices with gas prices," le Maire remarked prior to the discussions. He emphasized that maintaining this correlation hinders Europe’s transition to renewable energy sources. The shift towards greater electrification and away from fossil fuels like gas could result in higher prices if the link is not severed.

He pointed out that addressing climate change will likely result in sustained higher energy costs due to the connection with gas prices and the considerable investments required for renewable energy and nuclear power.

"For years, not merely months, we will contend with elevated price levels," le Maire stated, adding that persistent high energy costs are set to be a significant political issue in the years ahead.