Brussels moves to prevent Germany from weathering the energy crisis on its own

Brussels requires the Twenty-seven not to promote "a subsidy race" that fragments the single market and puts "into question the principle of solidarity" that should govern the response to the energy crisis.

The Commissioner for the Internal Market, Thierry Breton, has sent a letter to the Member States in which he asks several questions to coordinate the reaction to rising energy prices and asks them to support the industry.

But he also reminds them that we must "maintain equal conditions, especially with respect to those with less budget margin."

This is equivalent to pointing out that the less indebted countries are in a position to support their companies much more, thus placing them in an advantageous position compared to those of other countries with more debt.

The letter, to which EL PAÍS has had access,

The announcement from Berlin was quickly answered in Rome.

"We cannot divide ourselves according to the margin of our national budgets," warned the outgoing prime minister, Mario Draghi, who was joined, much more harshly, by an adviser to the ultra Giorgia Meloni, who aims to be the new prime minister after winning in the last elections: "It is a precise, deliberate action, not agreed upon, not shared, not communicated, which underestimates the reasons for our union".

The reason why Germany and Italy have received the blow in the first row in this crisis is the same, both have -or had- a great dependence on Russian gas, but their starting point differs a lot: the Italian public debt is equal to 152 .6% of its GDP, more than double that of Germany (68.2%).

Commissioner Breton came to join these warnings, although with much more subtlety, with several messages on Twitter.

“I have taken note of Germany's €200 billion plan to tackle rising energy prices which we will review carefully.

Two reactions from my side: 1. Surveillance of the 'level playing field' 2. What room for maneuver for the other Member States?

At the same time that he launched this message on the social network, followed by others, the letter signed by the French politician and businessman was sent from Brussels to the rest of the capitals.

I have taken note of Germany's €200 billion plan to tackle #energy-price surge — which we will carefully review.

Two reactions on my part:

1. #Vigilance on the "level playing field"

2. What room for manoeuvre for the other Member States?

pic.twitter.com/nBzRKAqyTc

– Thierry Breton (@ThierryBreton) September 30, 2022

“When we look at the actual full debt picture (financial, defence, carbon), the starting point for each member state in upcoming budget discussions is quite different than it appears.

Therefore, the notion of virtue is very subjective and, in fact, not very representative of the efforts made by the Member States if a wide spectrum of policies is considered”, Breton himself pointed out in a speech delivered in Amsterdam at the beginning of September.

Based on this reasoning, it follows that the French consider not only problematic, but also unfair, that the intensity of each State's response to this crisis will depend on its borrowing capacity.

Since energy prices soared and the specter of Russian gas supply cuts began to take shape, Brussels has been careful to ensure that the response is unitary (sanctions, gas and electricity savings).

It has also called on the Member States to help, above all, the families and companies that need it most.

But at this point a risk that was already seen in 2020, when the coronavirus arrived and stopped economic activity, grows a lot: less indebted countries and with more financial capacity can give more aid to their companies, which compete in an open market with others from countries that cannot give them the same support.

For this reason, two such authoritative voices in economic matters such as Draghi and Breton, also a former Minister of Finance in France,

they issue the warning that with unequal responses the internal market is put at risk.

Two years ago, after an initial uncoordinated reaction that threatened the single market, a historic step was taken: the Recovery Fund was created, endowed with almost 800,000 million.

lukewarm response

When on Friday the official spokesmen of the Commission were asked about the German movement, the answer given was not so eloquent: “The role of the Commission is to guarantee fair and equitable competitive conditions in the single market.

[...] A reasonable and proportionate application of state aid rules in the single market ensures that this government aid to companies affected by the energy crisis after the war in Ukraine avoids distortions”.

Hours later the letter and messages from Breton arrived.

Despite the clear position of the Frenchman and the fact that his responsibility concerns the internal market, it is not among his functions to monitor that the rules of State aid are complied with.

That corresponds to Margrethe Vestager, vice president of the Commission and head of Competition.

As Breton recalls in the letter, the Commission has urged the States to launch aid plans.

In fact, in March and July the Commission approved modifications to the State aid regulation that relaxes the conditions under which these subsidies can be granted.

What happens is that the German alone is equivalent to more than a quarter of what the entire recovery plan for the covid-19 crisis represents, which has raised so much hope in countries like Spain or Italy, and almost triples the social shields against the prices launched by France for this year and the next.

In the letter, Breton also points out that after the response to this crisis, it is time to invest, thinking not only of the present, but also of the future.

“Beyond the admittedly essential reform of the electricity markets, we must rapidly accelerate and drastically accelerate the deployment of transformative technologies.

Building on the work already underway in the battery, clean hydrogen and solar PV sectors, I will engage with you shortly to develop a platform where policy makers, industry and banks can work to identify the investment and other needs for these transformative technologies,” he promises.

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