EU nations starting to echo the tensions that divided northern and southern member states

Russia’s gas cut could fracture the unity of Europe’s Union this winter, as tight budgets and supply issues limit the bloc’s ability to deal with an unexpected, severe energy shortage.

Five months after the invasion of Ukraine, EU nations seek to maintain their common response to President Vladimir Putin’s blackmail. However, their discussions echo the tensions between the northern and southern member states following the financial crisis.

On Tuesday, member states agreed to reduce their gas demand by 15% for the next eight months. Severe disruption of supplies from Russia could make that a binding goal. After southern countries, in particular, resisted an initial proposal by the European Commission (the EU’s executive arm), the compromise agreement was reached.

Teresa Ribera, Spanish Deputy Prime Minister, saw the original commission’s plan as a “disproportionate Sacrifice,” and pointed out that “unlike other countries, we Spaniards don’t live beyond our means energy-wise.”

Some resentment is directed at Germany because of its large and energy-hungry industrial sector. The country, which has for years accused Spain, Portugal and Greece of economic irresponsibility, is now asking the EU for solidarity to offset the effects of falling Russian gas flows.

According to a senior EU diplomat, some member states might be reluctant to make sacrifices for Berlin for its inability to diversify energy sources. At the same time, it is lecturing southern countries on how to put their fiscal houses in order.

Euro Crisis

Another senior diplomat stated that tensions from the worst euro crisis could return if Russia cuts its gas supplies to countries that are less dependent upon it. This would force countries that have lower dependence on it to limit consumption for households and companies.

After the financial crisis, disunity within the bloc grew to be more severe. During the 2015-2016 migration crisis, new divisions erupted between western and eastern member states.

With joint vaccine purchases and a recovery account financed through common debt, the EU ended the discord that existed during the Covid-19 pandemic. Six rounds of sanctions were approved to further cement the unity of the 27 countries in the wake of Russia’s invasion and occupation of Ukraine.

The energy crisis is now being addressed by the commission and some member states. They are echoing the terminology used a decade ago to describe systemic bank systems. They note that if the country’s strong industry was forced to deal with the gas cuts on its own, the fallout for the EU market would be too devastating.

“Community of Destiny”

Robert Habeck, German Economy Minister, stated that an economic crisis in Germany would lead to a crisis for the entire European economy. He spoke on the sidelines last week of a trip through Prague and Vienna. He said that Europe is now a “community for destiny”. The German economy ministry declined further comment.

Simone Tagliapietra is a researcher at the Bruegel think tank in Brussels. She argues that it’s payback.

Tagliapietra stated that the north had shown solidarity to the South during Covid and the same should be done now in the opposite direction. The compensation mechanism idea, which can be used to protect the environment and reduce the risk of energy protectionism and fragmentation, is a way to make sure that this principle does not fail.

Tagliapietra suggested the establishment of a compensation mechanism for gas supply and demand options, which would be made possible by certain countries for the most vulnerable.

However, a top German official admitted that EU solidarity could unravel quickly in the event of severe gas shortages this winter. Germany has spent 15 billion euros ($15.2 million) to purchase gas on the international market. This is despite technical problems, including a shortage of infrastructure for liquefied gas. It also upset some EU partners by driving up gas prices.

The EU would have 65%-71% of its gas supplies cut off, which would result in stockpiles below the target of 80%. This is lower than the 80% target. It said that there was a gap of 30 Billion cubic meters in winter weather conditions and a continuous high LNG supply. This would indicate that storage could run out in many member states by April next year.

According to simulations by the commission, this would mean that the situation could get worse in the winter ahead. Stockpiles in 2023 may only be half full.

Even though heated discussions might threaten unity, those who were at the receiving end of German pressures a decade back remain optimistic that solidarity will prevail.

“There is no time for new divisions north and south. We managed to overcome them during the Covid crisis,” said Miltiadis Varvitsiotis of Greece, who holds the position of alternate foreign minister, which includes responsibility for European affairs. It would be a political step back if we brought back these divisions.

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