There was a collective sigh of relief on Wednesday when it became apparent that Russia had not escalated its war in Ukraine and fired missiles at a NATO country. But the consequences of the conflict on the doorstep of the European Union – high energy costs, rising inflation and an impending recession – are still very much present. Let’s examine the less positive implications of the much-heralded reduction in industrial energy consumption.
In slightly more positive news, the European Commission on Wednesday gave resounding support for Bulgaria, Croatia and Romania to join the border-free Schengen area as soon as possible. I will present to you the probabilities of joining the three countries next year.
And we’ll hear about the latest regulatory reduction when it comes to pesticide use in the European Union.
industrial malaise
As the EU debates whether and how to cap gas prices to support the economy, it likes to point to one success – the reduction in demand. But on the other hand, reduced energy consumption also means less industrial production and, in some cases, permanent shutdowns, writes Andy Bounds in Brussels.
Consumption fell by a quarter in October compared to the 2019-21 average for the month, according to think tank Bruegel. This “reduces energy bills, ends Vladimir Putin’s ability to weaponize his energy resources, reduces emissions and helps rebalance the energy market,” Executive Vice President Frans Timmermans said in September.
Some business leaders see it differently. Fredrik Persson, president of BusinessEurope, says much of the drop comes from companies that have cut production or even closed. He points to Italy, whose gas consumption fell 24% in October.
“People say, ‘OK, you were very good at saving,’ but when we actually talk to our Italian friends they say, ‘No, that was because people are reducing production.’
However, most do not advertise their fears. “It’s a bit like drowning – you’d think people would scream in that situation. But it’s done discreetly.”
Other countries saw even greater declines. In Portugal it was 48% and in Romania, 78%. Portugal’s ceramics industry, which needs gas to power its kilns, has suffered, Persson said.
According to him, European Union companies face a “serious loss of competitiveness”, as wholesale gas prices are five to seven times higher in Europe than in Asia and the United States.
German chemical company Basf recently said it would expand production in China and “permanently downsize” in Europe due to high energy prices and slumping demand.
In Germany, the industry accounts for a quarter of demand. Figures show that output in energy-intensive industries started to decline in February and has been below the general industry level since May 2022.
In a September survey by the Association of German Chambers of Industry and Commerce, 8% of respondents were considering moving production elsewhere due to high energy prices in Europe.
Persson urged energy ministers meeting on Nov. 24 to support plans to tackle high prices, including a mechanism to prevent gas prices from rising electricity prices.
“There’s still time,” he said. “If we could control the price of energy… we could restore investment and business comfort in Europe. Our members want to be in Europe.”
Behind the Franco-Italian dispute over migration and how to deal with NGO rescue ships is the reality of growing numbers of people trying to cross the Mediterranean to Europe.
Schengen expansion
The European Commission yesterday asked member states to let Bulgaria, Croatia and Romania enter the borderless Schengen zone “without delay” because they have a “solid record of achievement”. But the answer to that lies with the Netherlands and Sweden, not Brussels.
Croatia is still new on the waiting list for Schengen expansion, where Bulgaria and Romania have been for over ten years. But with Zagreb on track to adopt the euro on Jan. 1 and its Schengen readiness untainted by fears of corruption and rule of law issues (as is the case in Bucharest and Sofia), it can only move forward.
That is, if Sweden’s new government can convince far-right Sweden Democrats to raise their opposition to any country’s entry into Schengen any time soon. Adding to the complexity of Sweden’s parliamentary calculations is a recent turnaround in the centre-left opposition, which was in government until recently and supported Schengen expansion.
“It’s time to say welcome,” said Home Affairs Commissioner Ylva Johansson, a Swedish Social Democrat. “These three member countries deserve to feel fully European. The wait has been a long one.”
The Swedish woes add to long-standing reservations expressed by the Dutch government and parliament towards Bulgaria and Romania over corruption and rule of law issues. Here too, however, there is some recent movement. The Romanian government has opened itself up to extra scrutiny from an inspection team that includes Dutch experts, and the commission has promised to issue a report on the rule of law and anti-corruption reforms in the coming weeks (both of which were Dutch preconditions).
Romanian Foreign Minister Bogdan Aurescu said in Bucharest that he was maintaining diplomatic efforts with the Netherlands and Sweden, adding that his Swedish counterpart had reassured him of his government’s support.
A remark by German Chancellor Olaf Scholz in his speech in August about Europe’s support for the three countries’ candidacies also revived hopes for some movement on that front. But it remains unclear whether all this will lead to the decision. This could be taken at the next Justice and Internal Affairs Council, from December 8th to 9th.
Pesticides, very live
The European Commission has offered to reverse plans to ban the use of pesticides in much of Europe after they met stiff resistance from many countries, writes Andy Bounds.
Instead of banning their use in public places, sports fields, water catchment areas and protected areas such as nature reserves, Brussels is now prepared to allow biological control, low-risk substances and other approved substances, as well as all products allowed in organic agriculture.
Commission officials unveiled a draft of the pesticide regulation changes at the ambassadorial meeting yesterday.
“The proposal [original] is seen as very ambitious and affecting a disproportionately large area of the territory of the member states”, says the document, seen by Europe Express.
About 40% of Slovenia, for example, is protected area that includes a lot of agricultural land. In some countries, the entire territory is designated as a water catchment area.
The commission wants to allow governments more freedom to define the most sensitive areas.
Some 10 Central European countries have blocked progress on the proposed regulation, published in June, which aims to halve pesticide use by 2030 and encourage alternative methods of pest control.
The changes will still have to be agreed upon by member states. And thorny problems remain. The commission has proposed a 50% reduction per country and a total ban in some areas, but nations with lower pesticide use, such as Poland, want the same allocation for all 27 members. There are also complaints about the administrative cost of the system.
Health Commissioner Stella Kyriakides will no doubt say she listened to national politicians. But Green groups will say she ignored them, possibly setting up a confrontation with the European Parliament, which tends to be more ambitious on environmental legislation.
Translated by Luiz Roberto M. Gonçalves
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