'EU is on fire' Polexit and energy price chaos leaves bloc scrambling to save face

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Angela Merkel avoids handshake with Ursula von der Leyen

The heads of the EU are meeting in Brussels for the autumn Council summit and as expected they locked horns over Poland’s increasingly temperamental position in the bloc and solutions to the energy crisis. Leaders struggled to come up with a solution to any of the issues touched upon in the discussions on day one of the summit, prompting German media to denounce “the EU is on fire” as the bloc appears ever more divided.

German daily Welt published a roundup of the talks titled “Once again the European house is on fire”.

This was Angela Merkel’s last official EU summit in her German Chancellor’s shoes.

The German daily claimed that as usual, Mrs Merkel was forced to be the voice of reasoning to calm down opposing factions in the bloc.

They wrote: “In the 16 years of her chancellorship, Angela Merkel never had much time to take a breath.

“First the euro crisis, then the refugee crisis and now the corona pandemic.

“It was therefore significant that the likely last EU summit was not the expected quiet event with nice farewell toasts at dinner with pistou soup, sea bass fillet with sautéed fennel and a strawberry cake for dessert.

“Rather, the European house was once again on fire.”

The outgoing German leader was reportedly the one who convinced her counterparts to have a constructive discussion about Poland’s position in the bloc, rather than hit the biggest eastern European country in the EU with sanctions and legal proceedings.

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EU news: Merkel called on counterparts to have a dialogue with Poland (Image: GETTY)

Though, before entering the room, European leaders lined up to chastise Warsaw on Thursday for challenging the EU’s legal foundations, but Poland’s premier said he would not bow to “blackmail” as he joined a summit of the bloc’s 27 nations.

Polish Prime Minister Mateusz Morawiecki said he was ready to resolve disputes with Brussels, though many are worried that a stubborn ideological rift between eastern and western Europe poses an existential threat to the EU itself.

“A few days ago, the legal bedrock of our Union was challenged,” European Parliament President David Sassoli said in a letter as the leaders gathered in Brussels for their summit.

“This was not for the first time, of course, nor will it be the last. But never before has the Union been called into question so radically,” the leader of the EU assembly said.

Long-running tensions between Poland’s ruling nationalists and the bloc’s liberal majority have spiked since Poland’s Constitutional Tribunal ruled this month that elements of EU law were incompatible with the country’s charter, challenging a central tenet of EU integration.

The dispute not only risks precipitating a new fundamental crisis for the bloc, which is still grappling with the aftermath of Brexit. It could deprive Poland of generous EU handouts.

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“Some European institutions assume the right to decide on matters that have not been assigned to them,” Morawiecki said as he went into the talks, which come two days after the executive European Commission threatened to take action against Warsaw.

“We will not act under the pressure of blackmail … but we will of course talk about how to resolve the current disputes in dialogue.”

His wealthier Western counterparts are particularly keen to prevent their governments’ cash contributions to the EU benefiting socially conservative politicians who they see as undercutting human rights fixed in European laws.

“If you want to have the advantages of being in a club, then you need to respect the rules,” Belgian Prime Minister Alexander de Croo said. “You can’t be a member of a club and say ‘The rules don’t apply to me’.”

As they moved onto the official topic on the agenda – the energy crisis – tensions rose even higher in the room.

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EU news: Leaders met in Brussels for the autumn Council summit (Image: GETTY)

The European Commission last week published a “toolbox” outlining the national measures governments can take and said Brussels would look into longer-term options to address price shocks.

EU leaders debated those options on Thursday. Most EU countries have already drawn up emergency action plans to shield consumers, including energy tax cuts and subsidies for poorer households.

Their final summit conclusions invited countries to urgently use the toolbox “to provide short-term relief to the most vulnerable consumers and to support European companies”.

Longer-term measures are more contentious, with countries split over what action the EU should take to shield itself against future price spikes.

In what EU diplomats called a response to a push from the Czech Republic, the summit conclusions were updated late on Thursday to invite the European Commission “to study the functioning of the gas and electricity markets, as well as the EU ETS market, with the help of the European Securities and Markets Authority.”

The Commission should then assess “whether certain trading behaviours require further regulatory action,” the conclusions said.

Poland, the Czech Republic and Spain have asked the EU to limit financial speculators’ participation in the carbon market, which they say said has helped push CO2 prices to record highs.

Poland also wants Brussels to investigate whether the behaviour of Russia’s Gazprom has stoked European gas price rises.

The Commission has already agreed to study both issues, but not committed to take immediate action.

European gas prices have hit record highs as tight supply has collided with economies emerging from the COVID-19 pandemic, amid surging CO2 prices and lower-than-expected gas deliveries from Russia.

That has prompted some member states to call for an EU response – with Spain, Italy and Greece proposing a new system of joint gas buying among EU countries to form strategic reserves.

Others, including Germany and the Netherlands, are wary of overhauling EU regulations in response to a short-term crisis.

The Commission said gas prices were expected to stabilise at a lower level by April.

The tussle over the EU response to the energy price crunch will be picked up at an emergency meeting of EU energy ministers on October 26.

A preparatory note ahead of that meeting, seen by Reuters, said ministers would debate “what further measures at EU and Member State level, including the use of EU financial tools, could be envisaged”.

The price spike has also stoked familiar tensions over the EU’s policies to fight climate change, with Poland calling for Brussels to change or delay some planned green measures.

Hungarian Prime Minister Viktor Orban on Thursday dismissed EU climate policy plans as a “utopian fantasy”. That view is at odds with other countries that say high gas prices should speed up Europe’s shift to renewable energy to reduce countries’ exposure to volatile fossil fuel prices.

Additional reporting by Monika Pallenberg



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