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Scholz defends German energy plan against EU critics

Chancellor Olaf Scholz on Tuesday pushed back against European criticism of Germany’s 200-billion-euro ($198-billion) energy fund, saying other countries were also taking steps to shield citizens from historic price shocks.

“The measures we are taking are not unique but are also being taken elsewhere and rightly so,” Scholz said at a Berlin press conference.

France and key members of the European Commission have voiced concern about a go-it-alone approach by Berlin and are calling for EU-wide solutions to the energy crunch aggravated by war in Ukraine that has seen key supplier Russia turn off the gas taps.

They fear that European countries with high debts cannot afford the largesse demonstrated by Germany, the EU’s biggest economy, thus distorting the single market.

But Scholz insisted Germany’s planned measures, including caps on power prices, were justified to help citizens and businesses cope with sky-high gas and electricity bills.

“Prices must come down,” he told reporters, speaking alongside Dutch Prime Minister Mark Rutte.

Asked whether Germany was displaying a lack of solidarity with its European Union peers, Scholz replied that other countries would benefit from massive investments in LNG terminals at German ports.

Germany was creating these import capacities “not just for Germany but also for many of our neighbours in the Czech Republic, Slovakia, Austria and beyond,” he said.

– ‘Misunderstanding’ –

German Finance Minister Christian Lindner also moved to reassure his EU counterparts about Berlin’s energy plans at talks in Luxembourg on Tuesday.

“There had been a misunderstanding…. Our package… is proportionate if you compare the size and the vulnerability of the German economy,” Lindner said.

“We are using our economic strength to protect ourselves.”

Lindner and Scholz both stressed that the 200-billion-euro fund would finance support measures until 2024, “so this is not just over a short period”, the chancellor said.

Berlin’s defence came after two key members of the EU’s executive singled out Germany for its plan in a rare rebuke from Brussels to the bloc’s most powerful member state.

Internal market commissioner Thierry Breton and economy commissioner Paolo Gentiloni, from France and Italy respectively, said that Berlin’s plan “raised questions” on fairness and urged a “European instrument” to help countries.

They added that creating a mechanism similar to the so-called SURE programme, which the EU launched during the coronavirus crisism, should be looked at.

That provided member states with favourable EU loans to pay for short-time work schemes decimated by pandemic lockdowns.

“What we did with this SURE mechanism during the pandemic was an interesting proposal. It is based on loans. And I think it could be realistic,” Gentiloni said.

That programme was less ambitious than the historic 750-billion-euro Covid recovery programme which saw the EU’s 27 member states jointly emit fresh borrowing to save Europe’s economy.

Lindner, a fiscal conservative, ruled out any programme that would resemble the landmark pandemic rescue.

“I don’t think joint borrowing will be a solution,” he said.

In Berlin, Scholz and Rutte also suggested that it was too early to consider new joint borrowings, as they pointed out that the huge funds from the Covid recovery fund had not yet been exhausted.