Good morning and welcome to Europe Express.
Gas price rises are back and the timing couldn’t be worse for the European Commission, which is due tomorrow to make new proposals to tweak the energy market. We’ll unpack why countries are unhappy about Brussels not going far enough.
Gas transit (and origin) countries including Ukraine and Azerbaijan will be represented in Brussels tomorrow by their leaders at a summit with five Eastern Partnership nations — we’ll look at the stakes and why some want to break off.
And after French president Emmanuel Macron poured cold water on Polish and Hungarian hopes to see their EU recovery fund allocations any time soon, we’ll explore how the other countries are faring and what difficulties remain.
Clubbing together
A fresh surge in European gas prices comes at an awkward time for Brussels, which this week will attempt to calm panic in its member states about record energy prices, writes Mehreen Khan in Brussels.
European gas futures rose 10 per cent yesterday on the back of comments from Germany’s new foreign minister about Russia’s Nord Stream 2 pipeline not being compliant with EU law. The surge builds on steadily rising wholesale gas prices in December, accelerating a trend that has increased anxiety levels among EU governments since the autumn.
The European Commission will make a legislative intervention tomorrow, unveiling draft plans to provide options for common EU gas storage capacity and shared procurement. The proposals are in direct response to concerns from southern and eastern governments that many households will struggle to foot higher energy bills this winter.
Brussels’ plan will offer countries the chance to pool resources and carry out common gas purchasing and store it in shared “strategic reserves” to be tapped during emergencies, according to an EU official. Countries can voluntarily club together based on whether they share similar energy security risks, for example Denmark, Poland and Sweden, which tap gas supplies from Norway.
The regional designations are an attempt to ease the fiendishly difficult task of setting up common gas storage in a bloc where energy needs and resources for expensive storage are highly divergent. Less than a dozen EU countries have strategic gas reserves, and the EU’s voluntary system will require governments to fund setting up shared capacity between themselves. Current European gas storage is running at less than two-thirds full, about 10 per cent lower than seasonal norms.
The commission’s proposals will not offer sweeping changes to EU energy pricing rules, as demanded by Spain and France. Brussels has dismissed the need for a root-and-branch revamp of its energy market in response to a price surge which it said is likely to dissipate next spring.
But the return of record gas prices this week will refocus attention on squeezed poorer households and embolden countries who don’t want this energy crisis to go to waste. For some member states, the crunch should force a fundamental break with Europe’s reliance on Russian gas, piling further pressure on Germany’s Nord Stream 2 involvement.
For others, there’s a reason to hit the brake on the EU’s ambitious green transition. Threatening a veto over EU policy, Poland’s justice minister told the FT this week that Warsaw “should . . . revise its commitment to EU climate and energy policy, which results in drastic hikes of energy prices”.
Chart du jour: Rise of the Omicron
Omicron will become the dominant coronavirus variant in Denmark this week, epidemiologists say, driving a rise in cases to record levels and offering a warning to the rest of Europe about the more transmissible mutation.
And then they were three
Tomorrow sees the first meeting in four years between the EU and its eastern neighbours, some of whom still aspire to join the bloc one day, writes Andy Bounds in Brussels.
Charles Michel, European Council president, and commission president Ursula von der Leyen will meet the leaders of Ukraine, Moldova, Georgia, Armenia and Azerbaijan.
Belarus, the sixth member of the Eastern Partnership, has suspended its participation in the group as relations between the dictatorship and the EU deteriorated over the migrant crisis, human rights and other issues.
Armenia and Azerbaijan fought a war last year over the Armenian-controlled enclave of Nagorno-Karabakh. Michel will meet the leaders of the two countries separately and then together.
Ilham Aliyev, Azerbaijani president, and Nikol Pashinyan, Armenian prime minister, first met last month in Russia after an invitation by Vladimir Putin. Russia brokered the ceasefire a year ago but sporadic fighting has flared up since. EU officials said that the two countries’ army chiefs had set up a hotline on Michel’s suggestion, which had calmed tensions.
The Eastern Partnership summit will see the launch of a €2.3bn regional economic investment plan funded by the EU, which aims to support post-Covid-19 recovery and accelerate green and digital infrastructure. The hope is that the plan will leverage up to €17bn in public and private investment. There is also €75m for vaccines from EU countries via the Polish Development Agency.
Brussels is desperately trying to prevent the Eastern Partnership itself from fracturing, though. Ukraine, Moldova and Georgia, tired of waiting for the other three to reform, have formed a trio and signed free trade agreements with the EU. Their people also benefit from visa-free travel.
They want to join the bloc, which is reluctant to admit new members after disputes over migration from poorer countries and fears of adding to an “awkward squad” that includes Poland and Hungary, who chafe against many of the EU’s rules.
A senior EU official said that there was still “so much runway” for countries to cover before membership talks could start that “it makes sense to keep the Eastern Partnership together.”
Powering up the recovery fund
As 2022 looms, the complex process of paying out tens of billions of euros under the EU’s recovery plan is about to shift into a high gear, writes Sam Fleming in Brussels.
Yesterday evening, commissioners Valdis Dombrovskis and Paolo Gentiloni updated the European parliament on where things stand. Hungary, Poland, Sweden and Bulgaria have still not received commission approval for their plans while the Netherlands hasn’t got around to submitting a plan at all.
The other 22 member states, however, have now received EU sign-off for their proposals to tuck into the €800bn NextGenerationEU programme. The commission has already forked out €52.4bn in pre-financing.
The next step is for member states to sign up to monitoring arrangements and start submitting their regular payment requests — mostly at half-yearly intervals — which will be dependent on hitting pre-agreed reform milestones and targets.
France and Spain have already submitted their first payment demands to Brussels. Spain’s request received a rapid approval from the commission this month because Madrid made sure it had already put in place the various reforms linked to the payment months ago. It should, accordingly, soon reap a €10bn dollop of recovery fund cash.
For the rest of the member states the hoops should in theory be harder to jump through. To get their hands on the recovery fund bounty, they will have to prove to the commission that they are enacting hundreds of reform targets and milestones, all of which have been laid out in plans agreed with Brussels.
If a country misses key targets, the commission can refuse to pay out some of the recovery cash. Any government that gets itself into that situation will quickly find itself in very hot political water.
What to watch today
-
EU affairs ministers meet in Brussels to prepare for the upcoming leaders’ summit
-
The European parliament votes on its negotiating position for the Digital Markets Act
Notable, Quotable
-
Bulgaria U-turn: Kiril Petkov, Bulgaria’s new prime minister, has signalled that Sofia will end its obstruction of North Macedonia’s bid to join the EU once his government takes office.
-
Ex-minister, jailed: Denmark’s former immigration minister Inger Stojberg was sentenced to 60 days in jail for illegally separating refugee couples in asylum centres, one of a series of hardline measures she enacted.
-
Fintech France: When Macron said France should have 25 by 2025, the nation counted nine and wasn’t known as a tech hub. Two years later, France has 22 private companies valued at more than $1bn, nine of which are fintechs. (More here)