Brussels unveils Wednesday, October 13 a series of temporary measures to cushion the social impact of the rise in gas and electricity prices. The European Union urges member states to lower energy taxes and redistribute profits to the poorest. France has already decided to freeze gas prices until April. This is far from being the case everywhere in Europe.
No price freeze in Germany
Berlin is not on the same line as France or Spain. Generally speaking, the State intervenes less in the economy than in France, if at all on this type of file. Last week Angela Merkel warned of simplistic solutions. Both Germany and the Netherlands consider the problem to be temporary. The German Chancellor even cleared Russia, which some accuse of profiting or fueling the gas crisis. Moscow honored its contracts, recalled Angela Merkel.
Beyond a question of philosophy, the pressure to react is perhaps less strong in Germany. The rise in gas prices is not as steep as in Spain. The cost of heating has increased by a third over a year. But the winter of 2020 had been particularly mild and gas prices had fallen in the wake of the health crisis.
However, an increase in heating costs by a third threatens the poorest households. The municipalities are therefore asking for an extension to adapt the heating premium that they pay to recipients of social minima. There are also questions about the security of supplies: reserves are only two-thirds full this year. We exceeded 90% last year, at the same time. If the winter is harsh, supply cuts are not excluded, the operators of these strategic gasometers are alarmed.
The price of gas is set to increase further in Germany in the coming months due to two factors: on the one hand the situation on the world market which is pushing up prices, and on the other hand, the increase in gas prices. the carbon tax on January 1, 2022. We will go from 25 to 30 euros per tonne.
Heated debates in Spain
For months, the Spaniards have watched incredulously soaring electricity prices without knowing what to do. Repeated historical increases which are at the origin of a hot political debate between the government and the opposition, led by the conservative Popular Party (PP). Pablo Casado, the leader of the PP, has repeatedly asked the head of the Spanish government, Pedro Sánchez, for explanations, especially in the hemicycle. “The second thing you promised was the social shield but you electrocuted it by exploding the electricity bill. When do you think you will solve the problems of the Spaniards, instead of making them worse?”
The PP accuses the executive of not sufficiently protecting Spanish families, especially the most vulnerable, and of not knowing how to solve the problem of rising electricity prices. Pablo Casado even asked for the resignation of Pedro Sánchez, whom he considers incapable of facing this energy crisis.
To counter these criticisms of the opposition and those of the Spaniards who no longer know where to turn in order not to pay such steep bills, the executive has adopted several measures since the end of July, in particular the temporary reduction of VAT on the electricity, from 21 to 10%. He also planned to limit the extraordinary profits of electricity companies to lower the bills of users. A proposal applauded by consumers but which provoked an outcry from the big bosses of energy and the PP, who took their defense, denouncing confiscatory measures. In turn, the PP therefore defends users or large groups of energy. The important thing is that the political bronca continues in Spain.
Price surge inevitable in Turkey
Turkey, a country poor in energy resources, is one of the biggest European gas importers. And this gas, Turkey buys first – for a third last year – from Russia. The problem is that Turkey expects a record demand this year, especially because of the droughts which have caused a drop in hydropower production, hence an increase in demand for other sources of energy. To make matters worse, four long-term contracts signed with its suppliers expire at the end of the year, including two with Russia which have not yet been renewed. And even by renewing its long-term contracts, Turkey will still have to supply itself in the spot market anyway, when prices are soaring.
Natural gas contracts were also on the menu for a meeting between the Turkish and Russian presidents at the end of September. This meeting did not result in an agreement. However, Turkey has very few reservations to satisfy its demand if the negotiations are prolonged. Turkish officials assure the country will not experience a shortage this winter, but they admit that the bill will be heavy no matter what. President Recep Tayyip Erdogan has made reducing energy dependence a national priority, because this dependence weighs not only on the Turkish economy but also on its foreign policy choices.