The impact of the war in Ukraine on the price of energy and, as a rebound, inflation in the euro zone as a whole has caused a radical change in the European Union's vision of the functioning of its electricity market, which currently bases electricity tariffs on the price of gas. "The situation has changed completely since it was designed," acknowledged European Commission President Ursula von der Leyen, who until a few months ago was reluctant to the idea of revising the functioning of the market, raised last autumn by Spain and other peripheral countries.
With inflation in the euro zone at record highs and a dozen countries already experiencing full or partial cuts in Russian gas supplies, the situation has changed completely. The European Commission will prepare various pricing models to take into account the fact that there is now a large amount of renewable energy entering the system and the role of gas is becoming increasingly residual.
Inflation at record highs
Despite the urgency to take measures expressed by several European leaders, despite Mario Draghi's idea of meeting in July to discuss the economy, the matter will not be discussed by the European Council until October. "We will present the proposals after the summer," Von der Leyen said.
The European Council today reaffirmed its full support for Ukraine in the face of Russian war aggression but, with inflation at record highs, four months since the start of the war and six rounds of sanctions later, they have not hidden their concern about the economic consequences of the crisis.
Although the EU insists that Russia is responsible for all these problems, and not the sanctions imposed by the West, European governments are the ones who have to deal with the immediate consequences and have also tasked Brussels with a shock plan, on several fronts, to prepare for a complicated autumn and winter, with the prospect of possible cuts in Russian gas supplies.
"Apart from giving temporary support to citizens and companies, it is essential to help our society to adapt to the new conditions," defended the President of the European Commission, Ursula von der Leyen, who in July will present a common plan to reduce energy demand for the private sector and households at the same time. "We are not going back to the era of cheap fossil fuels," stressed the head of the EU executive, which has already presented a plan to diversify the EU's gas and oil suppliers, increase energy efficiency and boost the renewables market. There are encouraging signs, says Von der Leyen, such as the increase in supplies from the United States, Norway and Azerbaijan or the agreements signed with Israel and Egypt.
The ECB has given assurances that it will take measures to contain inflation.
The global economic and financial context is delicate, French President Emmanuel Macron has pointed out. "We are facing, at the same time, an accelerated return of inflation, the normalization of monetary policy and the first signs of economic slowdown," he summed up at the final press conference of the summit, which marks the end of the six-month French presidency of the EU Council.
European Central Bank President Christine Lagarde met today with the leaders of eurozone countries and assured them that she will take measures to contain inflation and that price growth will return to the 2% target in the medium term, in line with her mandate. Croatia's entry into the monetary union on January 1, 2023, made official today, "is a sign of the strength and resilience" of the common currency, Michel assured.