EU finance ministers discussed on Monday and Tuesday (3 and 4 October) how governments should respond to high energy prices, amidst warnings that the EU's financial system is under threat.
“We will discuss the support that European Union member states are providing,” said EU Economy Commissioner Valdis Dombrovskis as he arrived at the meeting on Monday. “And also the extent to which this is being done in a coordinated manner.” Ahead of the meetings, there was concern that Germany launched a 200 billion euro “economic defensive shield” last week to protect households and businesses from high energy prices.
Italy’s outgoing Prime Minister Mario Draghi condemned the plan as unfair. “Faced with today's common threats, we cannot divide ourselves according to how much room we have in our national budgets,” he said on Thursday.
His successor Giorgia Meloni, whose far-right “Brothers of Italy” party came first in last month’s election, also advocated for an “immediate European response” to the energy crisis. “No member state can offer effective and long-term solutions on its own,” she said.
However, “no new joint EU funding is being discussed this week,” an EU official who spoke on condition of anonymity told EUobserver. “Discussions will focus on national measures.”
Most of the 800 billion euro in EU pandemic recovery funds have not yet been invested, and according to some EU member states, including the Netherlands and Sweden, these should be used first. However, experts warn that a lack of coordination between EU national governments could lead to some countries faring better than others.
“If Germany’s gas price brake gives German companies a much better chance of surviving the crisis than, for example, Italian companies,” argued Simone Tagliapietra in a report published on Friday by Brussels-based think tank Bruegel, “then economic disparities in the EU could widen and European unity on the issue of Russia could be undermined.”
Coordinated response
The finance ministers' meeting took place following an unprecedented warning from the European Systemic Risk Board (ESRB) regarding “serious” threats to financial stability. Energy inflation and higher borrowing costs have increased the risk of recession, which, combined with the uncertainty caused by Russia's invasion of Ukraine, could spill over and trigger a widespread financial crisis, the board warned. It was the first “general warning” issued by the ESRB since its establishment in response to the financial crisis in 2010.
Head of the ESRB, Francesco Mazzaferro, in a letter addressed to the Council and seen by EUobserver, called for a “coordinated response”. “All relevant authorities must use all available microprudential and macroprudential tools to limit these risks,” the ESRB head wrote.