{"id":11218,"date":"2022-11-28T21:51:30","date_gmt":"2022-11-28T19:51:30","guid":{"rendered":"https:\/\/www.liberalglobe.com\/?p=11218"},"modified":"2022-11-28T21:51:35","modified_gmt":"2022-11-28T19:51:35","slug":"the-endless-crises-of-europe","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=11218","title":{"rendered":"The Endless Crises of Europe"},"content":{"rendered":"\n

Europe is preparing for a difficult winter. Apparently things are looking better than some initial predictions. Natural gas delivery at the beginning of next year is moving at 130 euros \/ megawatt hour, much higher than the pre-war prices in Ukraine, but lower than the worst-case scenarios. Gas storage facilities are at very high occupancy levels. Wholesale energy prices have fallen in most markets.<\/p>\n\n\n\n

In addition, the relatively good weather in several areas meant that central heating was either delayed or not yet switched on (eg in the south). With most governments opting to boldly subsidize energy bills, we can understand why some countries seem to have avoided the worst so far. For example Germany in the third quarter of 2022 had better than expected results and the GDP had an increase of 0.4% instead of the predicted 0.3%. Does all this mean that Europe is beyond the horizon of a major energy and economic crisis?<\/p>\n\n\n

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Europe’s permanent energy problems<\/strong><\/p>\n\n\n\n

First of all, we must not forget that Europe is currently paying for natural gas at wholesale prices that are 5-6 times higher than last year.<\/p>\n\n\n\n

Nor has it yet been able to find sources that fully cover the amounts of gas it does not receive (and will continue to not receive) from Russia. Hence the insistence on cuts in natural gas consumption.<\/p>\n\n\n\n

At the same time, Europe has recently turned particularly to natural gas, as it has been considered the ideal “transitional” fuel (one that we must not forget is a fossil fuel that contributes to climate change). Natural gas was seen as the best way to replace coal plants and in countries like Germany it was also the solution to shut down nuclear plants. At the same time, large industrial sectors such as the chemical industry, the ceramic industry and the food industry used natural gas to a large extent.<\/p>\n\n\n\n

These mean that even with consumption cuts to address potentially catastrophic gas shortages, Europe will continue to foot the increased gas bill, with no alternatives.<\/p>\n\n\n\n

In addition, there are also problems such as the effects of prolonged water shortages that have led to a decrease in the flow of rivers and a decrease in the volume of water in reservoirs. This gives rise to a double problem, which was particularly evident in the summer. On the one hand, hydroelectric plants cannot operate at full capacity. On the other hand, very low river levels create problems for the full operation of nuclear plants. This limits the easy recourse to increasing energy production from these sources to limit the use of natural gas.<\/p>\n\n\n\n

At the same time, despite the incentives for even more investments in RES, i.e. photovoltaics and wind turbines, we must not forget that it will take time before they can contribute to reducing dependence on natural gas. In fact, in Europe there has been an increase in imports of photovoltaic panels, but there is a decline in new orders for wind turbines.<\/p>\n\n\n\n

All of this means that the prospect of Europe being completely cut off from Russian gas sets the stage for a more permanent energy crisis in Europe, with deficits that cannot yet be easily covered.<\/p>\n\n\n

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The conflict over the cap on the natural gas price<\/strong><\/p>\n\n\n\n

At the same time, once again the cohesion of the EU is tested as “European solidarity” turns out to be rather a euphemism. This was seen in Germany’s rejection, first and foremost, of any thought of issuing Eurobonds to cover increased energy costs.<\/p>\n\n\n\n

However, it was also seen in the debate over the cap on natural gas. The proposed ceiling of 275 euros \/ megawatt hour, which is mainly a German proposal, met with strong reactions. The reason is that for many European countries this is too high a ceiling, especially since it is very likely that instead of a “ceiling” it will act as a “reference price” (if buyers have officially announced what is the maximum price at which will buy, sellers have no reason not to sell at that price).<\/p>\n\n\n\n

But Germany on the other hand fears that if the ceiling goes lower and there is increased demand in other regions of the world, then it is possible that quantities of natural gas will be directed to them and not to Europe, especially if there are higher prices there. This scares Germany as it needs natural gas for its industry much more than other countries and does not want to be forced to choose between energy production and industrial production.<\/p>\n\n\n\n

However, this German policy is in conflict with the basic anxiety of the countries, especially in the European South, which mainly want to avoid high energy prices, because this will have very high costs, fiscal and social, and therefore they would prefer a very lower ceiling and larger subsidy mechanisms.<\/p>\n\n\n

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The curse of debt mutualization<\/strong><\/p>\n\n\n\n

For years in Germany and other countries of the European North, two phrases were equivalent to anathema: “debt mutualization” and “distributive union”. The first referred to the refusal to issue “European debt” or to assume from Europe part of the debt of member states. The second concerned the resistance to a large distribution of resources from the richest countries to the poorest (let’s not forget that there may be countries that are net contributors to the European budget \u2013 that is, they give more than they receive \u2013 but this is a small part of the European GDP).<\/p>\n\n\n\n

These resistances continue even now. It is no coincidence that the issuance of “European debt” for the Recovery Fund was decided exceptionally and after great difficulties (and with clear compensation from the EU’s “own resources”).<\/p>\n\n\n\n

This to a large extent also affects an inequality between countries, which was also seen during the pandemic. The countries of the European North had lower external debt and this allowed them more easily to have generous aid programs as they had room to issue more debt. On the contrary, other countries, which can already be considered “over-indebted”, such as e.g. Italy, do not have the same room to increase their debt to deal with the energy and social crisis and would much prefer European measures and greater solidarity.<\/p>\n\n\n\n

Let’s not forget that it may be temporarily since the pandemic and then the deficit restrictions have been lifted, but there is pressure to gradually recover. This will create additional problems for countries that have tried to deal with the crisis with increased deficits.<\/p>\n\n\n\n

All this points to a Europe that will have to face serious energy and eventually economic problems at the expense of time. Problems that do not only concern the war in Ukraine but also the problems in the creation of the “European Structure” itself.<\/p>\n","protected":false},"excerpt":{"rendered":"

Europe is preparing for a difficult winter. Apparently things are looking better than some initial predictions. Natural gas delivery at the beginning of next…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[620,2955,818,390],"tags":[142,2272,2391,3455,25,155],"class_list":["post-11218","post","type-post","status-publish","format-standard","hentry","category-business","category-energy","category-europe","category-politics","tag-crisis","tag-debt","tag-energy","tag-energy-crisis","tag-eu","tag-natural-gas"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/11218","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11218"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/11218\/revisions"}],"predecessor-version":[{"id":11224,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/11218\/revisions\/11224"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}