Germany concedes transfer to cap fuel costs as EU wrestles with power disaster

German chancellor Olaf Scholz dropped his opposition to an EU fuel worth cap after late-night summit talks aimed toward quelling the power disaster hanging over the union’s financial system.

EU leaders agreed to endorse additional work in the direction of a cap that will “instantly restrict episodes of extreme fuel costs” — though with heavy caveats aimed toward easing Berlin’s fears that market interventions might endanger safety of provide.

The compromise is a reduction for EU international locations together with Italy, France, Spain and Belgium, which have lengthy demanded a ceiling on fuel costs because the cornerstone of efforts to ease the ache of soaring energy costs following Russia’s warfare in Ukraine.

Charles Michel, the European Council president, mentioned within the early hours of Friday morning that the bloc’s 27 leaders had reached an settlement that will convey down costs. “I’m assured that very quickly the consequences can be seen,” he informed reporters. “As a result of I believe that we despatched a transparent sign to the markets that we’re able to act collectively, that we’re capable of act collectively.”

Scholz, who had begun Thursday with a speech to the Bundestag outlining his opposition to a worth cap, conceded after the summit: “It is smart.”

“We’ve got mentioned the chance to restrict worth spikes,” Scholz mentioned. “There’s nonetheless quite a lot of concrete work to do there.”

In line with summit conclusions hammered out over 11 hours of talks, the leaders are requesting that Brussels “urgently” work on a “non permanent dynamic worth hall on pure fuel transactions”.

There would even be a mechanism to restrict the value of fuel used for electrical energy era — a technique already utilized in Spain and Portugal to restrict power payments.

The doc additionally mentioned that member states agreed to pursue joint buying of fuel, the event of a brand new benchmark for fuel costs, and to escalate efforts to chop fuel demand.

Nonetheless, the value caps might solely be applied if sure situations laid out by the European Fee are met, the textual content mentioned. These embrace not endangering safety of provide and never growing consumption of fuel because of decrease costs.

The fee’s proposed emergency worth cap mechanism would restrict surges in costs on the Dutch Title Switch Facility, the EU’s most important fuel worth benchmark.

“We’re proud of the method and the choices we’ve taken,” mentioned Belgian prime minister Alexander De Croo.

A part of the explanation for Germany’s earlier reluctance to embrace worth caps is a concern that they might danger diverting fuel to different international locations that provided a better worth, undermining European efforts to shore up provides as Russia cuts exports to the bloc following the invasion of Ukraine.

Nonetheless, attending what’s prone to be his closing summit as Italian prime minister, Mario Draghi known as for pressing motion to restrict the dangers of recession and fragmentation within the single market.

Imports from Russia made up 40 per cent of the EU’s fuel provide in 2021 however have dropped to round 9 per cent in current weeks as Moscow has more and more squeezed provides to retaliate in opposition to sanctions from Europe.

Arriving on the summit, Emmanuel Macron, the French president, mentioned: “I believe it isn’t good — both for Germany or Europe — that [Germany] isolates itself.”

Various member states have additionally urged Brussels to suggest further EU-level funding to ease the disaster and speed up the bloc’s bid for power independence from Russia, a push that’s backed by fee president Ursula von der Leyen.

Germany’s €200bn support package for companies and households has been criticised for utilizing fiscal firepower that many smaller member states lack and probably skewing the only market.

Further reporting by Sam Jones in Berlin, Leila Abboud in Paris and Andy Bounds in Brussels