German Finance Minister Christian Lindner said the government must tackle soaring electricity prices “with the utmost urgency”, as a leading German economist warned of a “gigantic shock” threatening Europe’s biggest economy.
In an interview with newspaper Bild am Sonntag cited by Bloomberg, Lindner said swift action was needed, otherwise “inflation will be driven more and more by an electricity crisis.” The electricity market should be overhauled so that prices are no longer linked to increasingly expensive natural gas, creating billions of euros in profits for wind, solar and coal plant operators “at the expense of consumers”, he added.
Amid warnings of blackouts and social unrest this winter, Europe’s politicians have set aside some 280 billion euros to ease the pain for businesses and households, but the aid risks overshadowing the scale of the emergency.
Sebastian Dullien, director of economic research institute IMK, said some members of Chancellor Olaf Scholz’s government did not seem to have grasped the scale of the threat, warning that “Germany is facing a giant macroeconomic shock”.
According to a “conservative” estimate by the Dusseldorf-based institute, businesses, households and the state will have to shoulder an extra burden of more than 200 billion euros next year, or about 5 percent of gross domestic product, it said. Dullien on Friday in a series of tweets.
The energy crisis will be high on the agenda when Scholz and his ministers meet for a two-day cabinet meeting outside Berlin, starting on Tuesday. The ruling coalition is considering imposing some form of emergency tax on energy companies, officials told Bloomberg last week.
The Czech Republic, which holds the rotating presidency of the European Union, said on Friday it would convene an emergency meeting of the bloc’s energy ministers to discuss possible solutions to the crisis.
Soaring electricity prices are the result of “market failure”, Czech Prime Minister Petr Fiala said and called for an EU-level measure to impose a cap. He is seeking support for the idea from other member states and plans to discuss possible price caps with Solz at talks in Prague on Monday.
Stephan Weil, premier of the state of Lower Saxony and a member of Scholz’s Social Democratic Party, said on Sunday that the situation was “alarming” and called for “rapid and decisive state intervention”.
If a European solution cannot be agreed in the short term, “suspension of electricity trading and temporary state regulation of prices” should be considered, Weil, who is running for re-election in October, said in a statement sent with Email.
In the long term, German Economy Minister Robert Habeck wants to overhaul the electricity market to decouple the price customers pay from gas prices, the Handelsblatt newspaper reported on Friday, citing a ministry spokesman.
Source: Capital
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