Former EU Commissioner urges preparations "for a war economy"

Expert urges timely preparations "for a war economy"

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The winter is turning grim because Putin threatens gas withdrawal.  Ex-EU Commissioner, Oettinger speaks of a war economy, rationing and even higher prices

The gas storage tanks (in the picture those in Haidach in the Salzburg Region) should be 80 percent full by the start of the heating season.  Experts doubt that is possible.

In Germany and increasingly also in Austria, nervousness is growing as to what will happen to gas supplies from Russia.  As of Monday, an important connection from the gas fields in Western Siberia will shut down.  The Baltic Sea pipeline, Nord Stream 1 has to be serviced, the work being scheduled to last for ten days.  The Russian gas monopoly, Gazprom announced this a long time ago.  Experts doubt that gas will flow again as usual on July 21, that is the Thursday of the week after next. Some are already talking about a war economy, for which Europe must prepare as quickly as possible.

Günther Oettinger is someone who uses the word "war economy" to mean far-reaching interventions by European states in the economy and society.  The former EU Energy Commissioner, who was on the road more than once as a fire fighter in the repeatedly flared up disputes between Russia and Ukraine, is pessimistic for this winter.

Lack of gas in storage

"The gas storage tanks will certainly not be full until autumn and  we will experience emergency management," predicts Oettinger.  "Putin is playing with us and wants to divide us.  He will send more gas, less gas or none at all, just as he pleases." While the dispute between Moscow and Kyiv was about different price expectations for Russian gas, the situation has changed completely since Putin's troops invaded Ukraine.

"In addition to tanks, artillery, rockets and biochemical weapons, wheat, seeds and energy are the main instruments with which the Russian president wants to bring the West to heel," Oettinger said at a German-Austrian expert meeting in Berlin organized by Verbund.  It is all the more urgent to save gas wherever possible in order to alleviate the foreseeable misery in winter.  18 degrees in the apartment and two sweaters; that is better than having to close large parts of the industry because there is not enough gas.

Joint gas purchase

In addition, all levers would have to be set in motion in Europe in order to initiate the joint purchase of gas from alternative sources – that is, not from Russia.  Such a platform is under construction, according to Energy Minister, Leonore Gewessler (Greens).  Austria has already requested quantities of gas; the platform is not yet operational.  When the time comes for it to be operational is written in the stars.

The fact that there are 27 different forms of energy policy in Europe is now taking its toll.  The nation states have never allowed this responsibility to be taken from their hands.  When ex-commissioner Oettinger called for "a Europeanization of energy policy," as at the event in Berlin, he found many supporters against the background of the current gas crisis.

"No country can do it alone, this requires EU-wide solidarity," says Verbund boss Michael Strugl. While Karoline Edtstadler (ÖVP), as Minister for Europe, is optimistic that the right lessons have been learned from Corona to deal with the gas crisis,  Oettinger thinks it is all going too slowly.  A needs assessment is needed to determine who needs how much energy and in what form in the short, medium and long term.  In addition, a plan of how the need can be met is needed.  And this summer, at a European Council meeting, the EU-27 should agree on how the much-vaunted solidarity between the member states can and should work in an emergency.

Inflation rising to 18 percent?

Meanwhile, energy prices continue to rise and as long as the war continues, there is probably no end in sight – on the contrary.  Wifo boss, Gabriel Felbermayr pointed out in Berlin that inflation could double to 18 percent if gas supplies were stopped during winter.  This would have hardly any impact on the economy for the year as a whole, but from December this could "possibly become a very big thing," said Felbermayr.

There was a threat of a war economy, including distribution problems, protesting people on the streets and short-time work.  Those on the street, in Austria could run into the hundreds of thousands  and in Germany into the millions.  One-off payments, such as those introduced by the Federal Government to dampen the first wave of financial burdens, were then no longer sufficient, especially since, as Verbund boss Strugl noted, only half of the price increases for electricity have reached the end customer, and even less for gas.

Price cap

Whether a price cap on gas could help to slow down inflation in the long term remains controversial among experts.  The best way to fight inflation would be to expand renewable energies.  Electricity from wind and solar power plants because it is produced comparatively cheaply, would force the expensive electricity from gas-fired power plants out of the market.  However, that won't happen quickly either.