Bloomberg: Europe misses another chance to fix its union

Russia’s efforts to use natural-gas exports as a geopolitical weapon present Europe with a challenge.

"Policymakers might be coalescing around what they see as an adequate plan. They should be more ambitious: Europe needs a permanent solution to its chronic coordination failures", Bloomberg's opinion article said on October 17.

"Vladimir Putin’s energy cutoff — intended to punish opposition to his invasion of Ukraine — is a classic external shock that will affect countries differently according to their dependence on Russian gas supplies, with both Germany and Italy among the hardest hit. To mitigate the impact of rising prices, help the most vulnerable get through the winter and speed the transition to other energy sources, public spending on the scale of hundreds of billions of euros is justified," the report added.

It added that support would immediately flow to the hardest-hit areas, initially through direct aid and later through income-tax relief and credits for both businesses and households.

"Some countries, including France, Italy and Spain, pushed for price caps that they hoped would reduce the cost of their own liquified natural gas imports. Germany, for its part, unilaterally announced a €200 billion ($195 billion) price-mitigation program. Markets reacted to the dissonance by increasing borrowing costs for Italy, where the government’s already heavy debt burden would make additional spending particularly fraught," the article says.

Bloomberg suggests that the EU should be able to establish a permanent fund to provide both loans and grants in emergencies — with clear procedures on its use, so that EU members needn’t negotiate a new program every time a crisis arises.

"If neither the pandemic nor a hybrid war with Russia can bring the EU to even consider such a possibility, it’s hard to imagine what will. The longer Europe waits, the greater the chance that its experiment in unification will fail," the article concluded.