EU Economy Risks ‘Full Stop’ on Energy Crisis, Belgium Warns

Lyubov Pronina
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(Bloomberg) -- Belgian Prime Minister Alexander De Croo warned that Europe needs to act immediately to address the energy crisis or risk the kind of fundamental economic shutdown that the bloc would struggle to recover from.

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“A few weeks like this and the European economy will just go into a full stop. Recovering from that is going to be much more complicated than intervening in gas markets today,” he said Thursday in an interview with Bloomberg News. “The risk of that is de-industrialization and severe risk of fundamental social unrest.”

De Croo said the European Union should impose a broad price cap on gas trading in the bloc without delay if it wants to save its industries from a shutdown.

“I honestly do not see any other choice than doing market interventions,” De Croo said. “We don’t get a second chance to prove as 450 million Europeans that we take things in our hands. What you are seeing today is a massive drainage of prosperity out of the European Union.”

De Croo spoke on the eve of a high-stakes meeting of 27 EU energy ministers in Brussels to discuss plans for radical intervention in the bloc’s energy markets. The measures to be discussed include putting a price cap on gas imported from Russia, mandatory target reduction of electricity use and a levy on fossil-fuel producers to use excess revenues to support consumers.

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With gas trading at 10 times the five-year average, European governments have only one shot to show they are capable of protecting the population and industry, De Croo said, adding that the decision should be imminent rather than drag out for a couple of months.

“I think we don’t have the space to again say, ok, we put something in the text and then we meet each other in two months,” he said. “In two months, with these prices, I fear it’s too late.”

Belgium’s federal government is calling for introducing broad price caps on gas markets rather than just on Russian imports “because Vladimir Putin already said that he would stop selling gas.”

The cap should be temporary and “dynamic,” offering a markup on Asian prices which are currently only half of what European customers pay, he said. This will allow time to think through how to restructure the electricity pricing mechanism for the future, he added.

While supporting assistance to energy distributors and reducing consumption, De Croo said that redistributing windfall profits “looks very complicated.”

On security of supply for gas and electricity this winter, De Croo said Belgium will be fine, but if any European country gets into a situation of blackouts it will be a “gigantic problem for all of us.”

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