European Union heads of state and Western Balkan leaders pose for a group photo during an EU summit in Brussels, Thursday, June 23, 2022.
Geert Vanden Wijngaert/AP
European leaders are reconvening on Friday morning for the second day of their summit dedicated to the economy after making the “historic” decision the day before to grant Ukraine and Moldova candidate status.
The cost of living crisis, soaring inflation and food security will be top of the agenda for EU leaders who will be joined in their discussion by European Central Bank President Christine Lagarde and Eurogroup chief Pascal Donohoe. The energy crisis, although not formally on the agenda, is bound to also be discussed.
We understand Italian Prime Minister Mario Draghi has asked for another Council summit to take place in July to delve more into the bloc’s economic situation so a decision on this may well be announced today as well.
Meanwhile, today may be cheered as historic by the Croatians too as leaders are set to decide whether to allow the country to introduce the euro following such a recommendation from the Commission earlier this month.
Follow live what’s happening at the summit in the blog below
Economic meeting running over: Senior EU official
The content of the article:
- 1 Economic meeting running over: Senior EU official
- 2 Why some EU leaders want to ‘decouple’ gas from electricity prices
- 3 Russia striving for ‘serious energy crisis’: Poland
- 4 First European Cooperation meeting to take place in Prague: Fiala
- 5 Everyone ‘concerned’ about inflation: Martin
- 6 Croatia ‘ready for the eurozone’: Plenković
- 7 Eurosummit now underway
- 8 ‘Ukrainians paying with their lives, we’re paying with our wallets’: Latvia
- 9 EU needs more gas infrastructure: Scholz
- 10 Member states should look for ‘national solutions’ to cost of living crisis: Slovakia
This morning’s session about the economy is taking longer than anticipated with leaders running over their allotted slots to present what their governments have been doing to tackle the cost of living crisis and rampant inflation, a senior EU official has told us.
On gas prices, leaders are working on a draft text on how to best confront this issue together but the idea of price caps, although mentioned, doesn’t appear to have gained much traction and was not at the heart of the debate, the official noted.
Discussions instead focused on how member states can interconnect as much as possible and help each other in terms of supply.
Another idea apparently not taking root is that of a summit in July.
Why some EU leaders want to ‘decouple’ gas from electricity prices
Since energy prices began to soar in autumn 2021, several EU leaders have repeatedly demanded a “decoupling” of gas and electricity.
Spain, Italy, Portugal, Greece, France and Belgium are among those who have backed the move, arguing Russia’s invasion of Ukraine demands a higher degree of market intervention. Italy is even promoting an EU-wide cap on gas prices, which is set to be discussed at todays’ summit.
The EU’s wholesale electricity market works on the basis of marginal pricing, also known as “pay-as-clear market”. Under this system, all electricity suppliers – from fossils fuels to wind and solar – bid into the market and offer energy according to their production costs. The bidding starts from the cheapest resources – the renewables – and finish with the most expensive one – usually natural gas.
The pro-intervention group believes this system has become problematic and is causing a contagion effect. Since most EU countries still rely on fossil fuels to meet all their power demands, the final price of electricity is often set by the price of coal or natural gas.
If gas becomes more expensive, electricity bills inevitably go up, even if clean, cheaper sources also contribute to the total energy supply. Russia’s decision to cut gas supplies to several member states has only exacerbated the upward trend on prices.
But the push for intervention is not widely shared. In fact, it is adamantly opposed by countries like Germany, the Netherlands and the Nordics, who defend the current system because it guarantees transparency and promotes investment in the cleaner resources. They also fear political meddling will only add more disruption to an already volatile market.
Russia striving for ‘serious energy crisis’: Poland
Mateusz Morawiecki told reporters leaders will discuss “the issue of Russia’s energy blackmail against Europe”, adding that “Russia would like to prepare a serious energy crisis.”
First European Cooperation meeting to take place in Prague: Fiala
The Czech Prime Minister, who will assume the rotating six-month EU presidency on July 1, has announced that a first informal summit on wider European cooperation with non-member states in Prague.
“Ukraine could be one of the guests,” Petr Fiala flagged.
Everyone ‘concerned’ about inflation: Martin
” Everyone concerned about chasing inflation and about adding fuel to inflation,” Irish Taoiseach Micheál Martin told reporters as he arrived for the second day of meeting with his EU counterparts.
He said there would be discussions about this “and perhaps looking for a more common approach on some issue in respect of the inflationary cycle and how Europe as an entity combats this.”
“It’s far more complex than, say, procuring a vaccine. You know, that was a major breakthrough for Europe. This was obviously a much more challenging situation, given the energy issue and the clear decision of Putin to ramp up the energy crisis potentially for the winter in cutting gas supplies to Germany and other EU states. So we are looking at a very challenging winter in terms of the energy crisis and that will have a follow-through in terms of famine and food. And that is a concern,” he also said.
He acknowledged the “very real risk” of inflation and stressed that ” that’s why this particular period has been navigated very carefully.”
He argued that although member states are impacted differently which might require them to take different approaches, “certainly on energy, there would be a sense amongst some leaders that if common procurement, for example, could develop on energy, that would help the price situation.”
Croatia ‘ready for the eurozone’: Plenković
Andrej Plenković said that today’s endorsement for the introduction of the euro in his country is “an excellent signal for Croatia, for Croatia’s economy.”
He branded it a “deserved and merited decision” and noted that it will be appreciated by other euro users as “70% of tourists that come to Croatia also come from the eurozone.”
“Croatia is ready for the eurozone and it will sustain the pressure,” he maintained, noting that having the euro will also help the country’s economy be “better prepared to sustain” shocks.
Eurosummit now underway
‘Ukrainians paying with their lives, we’re paying with our wallets’: Latvia
Asked about the impact the war in Ukraine is having on the economy, Arturs Krišjānis Kariņš stressed that “Ukrainians are paying with their lives and we are paying with our wallets and it’s difficult to compare.”
“It’s important that we speak with one another and see if it would be best to take common measures because they would be then most effective,” he argued.
Regarding the possible additional summit in July, he gave a similar response to Sweden’s Andersson, explaining that “if there is a need I’m, of course, willing and happy” to participate, but adding that “the question is, is there a result of all of us coming together?”
“If there are decisions to be made this would be a good reason,” he said.
On enlargement, he branded the previous day’s decision as “very good news for Ukraine and Moldova and I think it’s very good news for the EU.”
He said the bloc’s decision is the “exact opposite of what Moscow was aiming for” when it launched its invasion of Ukraine on 24 February. He argued Russian President Vladimir Putin was hoping a war would lead to a more disunited Europe and that he wished to “divide and rule and this is not working at all in the EU right now.”
He also called for “a more robust (NATO) presence in the Baltics”.
EU needs more gas infrastructure: Scholz
The German Chancellor also took some time to talk to the press this morning, saying that “we need to discuss this hard situation together” and in particular how to offer a common response to the economic challenges the bloc is facing.
“We need to develop our infrastructure so we can import gas from other countries,” he noted. This comes after Berlin announced that it is currently receiving 60% less gas than ordered from Russia.
He stressed though that “we have stability.”
On enlargement to the Western Balkans, Olaf Scholz said that “all six can trust Germany to will support their path to Europe” and that the EU “will stick to our promises.”
Member states should look for ‘national solutions’ to cost of living crisis: Slovakia
Eduard Heger, Prime Minister of Slovakia, said that the EU has “to realise inflation will stay with us for a longer period” and argued that “it’s important to really come up with national solutions.”
He used as an example the deal his government struck with a nuclear power provider to give “guaranteed prices for the next two years” and urged other governments to follow suit and work “with the market”.
“Right now, as I said, it’s very important that every country does what’s in its forces,” he went on. “We have to be very wise and always think of the sustainability of public finances, that’s very important because COVID cost us a lot of money so we have to think twice now.”