One would have had to be an eternal optimist to believe that the EU’s energy crisis would last for only a few weeks or months.
The interconnectivity of global economies meant that Russia always had the option of weaponising the EU’s dependence on Russian gas and oil supplies to achieve its military aims.
The European Union’s response to the challenging energy crisis has so far been characterised by dithering over how best to protect consumers from spiralling energy inflation and, at the same time, finding sustainable ways of funding the help given to households and industry.
In her State of the Union address last week, European Commission president Ursula von der Leyen made some bold statements that raised hopes that the Union has a clear strategy to manage the energy crisis.
She argued that the EU member states must raise €140 billion from energy companies’ profits to soften the blow of record-high prices this winter. Von der Leyen’s strategy is deceptively simple. She noted that the windfall tax would be an “emergency and temporary measure” and that “the bloc needed to cut electricity demand, lower gas prices and ensure the security of supply over the longer term”. As always happens when member states move to agree on Union-wide tactics, national interests intervene and implementation of good strategy slows down until unanimity is achieved.
Many of the EU’s 27 member states want the proposed mandatory cut in electricity demand, set at five per cent of usage in peak hours, to be voluntary. Others have questioned how peak hours of electricity demand should be identified. Some member states like France will cap electricity and gas price rises for consumers at 15 per cent in 2023 as they implement their own measures.
While the EU member states’ priority to protect households and businesses from the effect of skyrocketing energy prices is laudable, the measures adopted by some countries to cut inessential energy consumption in a time of crisis leave much to be desired.
Unfortunately, Malta has only resorted to appealing to households to economise on using energy voluntarily. This does not augur well for ensuring that taxpayers’ money used to fund subsidies is managed judiciously.
Finance Minister Clyde Caruana tried to reassure the public that his fiscal management strategy is right. He comments: “Of course, we must take great care of our debt, of how we spend government and EU funds and, yes, we also need to make sure the government collects every penny that is due to it.”
He believes that, unlike many other member states, Malta’s economic growth will remain robust in 2023 and beyond and that the €600 million subsidies that the government needs to spend on energy and staple foods next year is affordable. Caruana maintains that the government will not be forced to start curbing its expenditure.
Reassuring the public that we can overcome the energy crisis with hard work and some sacrifices is the reasonable thing to do.
But resorting to hubris is dangerous and will eventually backfire. Promises are best not made when the future conditions for fulfilling them are far from certain.
EU energy ministers will meet to agree on the final commission proposal at the end of this month.
There is a real risk that national differences will slow down an agreement on the tactics that need to be adopted to manage the energy crisis.
The reverential respect for free market dynamics needs to be tempered with an acknowledgement that ordinary EU citizens must be protected by the implementation of sustainable fiscal measures.