EU confronts ‘unprecedented’ and ‘unbearable’ spike in energy prices

European Union finance ministers confronted an "unprecedented" spike in energy prices that has raised questions about dependence on Russian gas and how to manage the green transition as they met in Luxembourg on Monday.

The issue dominated a meeting of the countries that use the euro as their finance ministers took stock of a post-pandemic economic rebound that has been accompanied by a jump in inflation that has made some governments nervous.

"The gas price has massively and brutally increased over the last weeks. It is clearly a matter of huge concern for all of us," said French finance minister Bruno Le Maire.

“The situation that we are facing today is unbearable. Unbearable for our citizens, unbearable for the private companies. So there is a need to change.”

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The surge in prices has heightened anxiety among national politicians about the potential impact of the EU drive to cut carbon emissions to net zero by 2050 in a bid to curb catastrophic levels of climate change.

But Minister for Finance Paschal Donohoe, who chaired the meeting as president of the Eurogroup, said the gas price hike strengthened the case for the green transition, which should be accelerated to reduce reliance on fossil fuels.

“The green transition is not the problem, it is part of the solution,” he said.

France and Spain teamed up to demand joint EU action to reform the energy market to stabilise prices, after a string of EU governments intervened to suppress gas costs in response to a public outcry.

‘Unprecedented spike’

"What we see is an unprecedented spike in energy prices," said Spain's finance minister Nadia Calvino. "This is not an issue that we can tackle at national level, we need a European co-ordinated response."

One idea could be for the EU to jointly negotiate gas contracts, she suggested, as a way to lock in lower prices for its 450 million citizens.

“We have learned through the negotiation of the vaccine supply that we are stronger when we speak with one voice,” Ms Calvino said.

Greece has suggested a common EU fund to help member states address the squeeze, while France called for a decoupling of electricity rates from gas prices ahead of proposals due to be set out by the European Commission on how to manage the issue.

But the discussion revealed old division lines among member states. Northern states such as the Netherlands and Germany have been resistant to calls for intervention, while for some, the surge in gas prices has underscored the vulnerability of Europe to dependence on Russian gas.

The EU is reliant on Russia for the bulk of its gas supplies, an arrangement expected to solidify with the completion of Germany's controversial Nord Stream 2 pipeline. France's Le Maire said Europe should not "be dependent on the supply coming from a foreign country", and said that the situation bolstered France's position that nuclear energy should be sanctioned as part of the green transition.

He also told reporters that rising demand for electricity combined with a need to invest in renewable and potentially nuclear energy sources would translate into higher energy costs for “years” and that governments needed to be frank with their citizens about this.

“We will have to face a long lasting increase of the energy prices,” Le Maire said. “This will be one of the major political issues of the next years.”