World

The EU on Friday will seek urgent ways to bring down skyrocketing energy prices as winter looms, with “sabotage” of gas pipelines from Russia this week injecting drama into the effort.

Energy ministers will gather in Brussels to consider an emergency European Commission proposal that includes cutting power use in the bloc, imposing windfall levies on energy companies and discussing a price cap on wholesale gas supplies.

Europe has found itself over a barrel as fossil fuel deliveries from Russia dry up. 

EU sanctions on Moscow for its invasion of Ukraine, which include shunning Russian oil starting in December, have prompted the Kremlin to retaliate by severely reducing supplies of natural gas.

Unexplained leaks on the undersea Nord Stream 1 and 2 gas pipelines from Russia to Germany — seen as “sabotage” by EU leaders, with suspicion falling on Moscow — have aggravated the situation.

– Sky-high bills –

Alarm is rising sharply among Europeans faced with climbing energy bills.

“It’s utterly impossible to pay,” Pascale Dumont, a baker in a Belgian town called Gedinne, told AFP after her business’s monthly electricity bill jumped tenfold, to 11,836 euros ($11,500).

“If you work it out over a year, it’s how much a house costs!” she exclaimed.

Business Europe, an EU lobby, warned that “the current state of high gas and electricity prices bears the imminent risk of production losses and shutdowns of thousands of European companies”.

The EU country on the frontline of the energy crunch is Germany, the bloc’s export powerhouse which had long been dependent on Russian gas.

After recording a jump to 10 percent inflation, its government said it will borrow 200 billion euros to shield German households and businesses from “an energy war”.

That adds to various national initiatives across the European Union totalling many hundreds of billions of euros — a hefty bill added to the one run-up during the worst of the Covid pandemic.

The European Commission is trying to leverage the Covid-era cooperation to forge a common EU approach on energy.

“Europe is facing energy blackmail by Russia, and global demand for gas is higher than supply,” EU energy commissioner Kadri Simson said.

“We need to work along the whole chain to tackle the challenge,” she said, adding that a price cap on the wholesale price of gas entering the EU “is possible” if other measures fail to bring results.

– Price cap mooted –

One core proposal with strong backing is a “cap” on non-gas electricity producers’ profits and a “contribution” from other energy majors. 

The levies — the commission refuses to call them a “windfall tax” — are calculated to raise 140 billion euros which can be spent to cushion consumers.

Another is to encourage reduced energy consumption, for instance by turning off public lighting earlier, lowering thermostats to a maximum of 19 degrees Celsius (66 degrees Fahrenheit) and lower peak-hour power use.

The Bruegel think tank in Brussels, however, said those steps are “not sufficient”.

“A more comprehensive plan needs to ensure that all countries bring forward every available supply-side flexibility, make real efforts to reduce gas and electricity demand, keep their energy markets open and pool demand to get a better deal from external gas suppliers,” it said.

Part of the problem in coming up with a more biting EU approach is the different energy mixes in member countries. 

France, for example, is largely nuclear-powered, while eastern EU countries rely on fossil fuels, and Spain gets its gas from North Africa.

Fifteen EU countries, among them France, Italy and Poland, have written a joint letter calling for a price cap on all gas imports into the bloc — covering pipeline gas from Russia but also liquified natural gas (LNG) shipments from the US and elsewhere.

An EU official briefing journalists on condition of anonymity called that idea “radical”.

The “significant risks” it carried included a sudden shortfall in gas supplies to Europe, especially from LNG suppliers diverting ships to more lucrative buyers elsewhere in the world.

One possible solution would be a centralised EU buying for gas “but the complexity of such a mechanism is such that I think in a short timeframe it is difficult to address,” the official said.

The French government vowed on Thursday to push through pension reform by the end of the winter despite fierce opposition from unions whose first major day of strikes failed to have much impact.

A nationwide day of stoppages called by the CGT union on Thursday — the first since President Emmanuel Macron was re-elected in April — caused some disruption, but was not widely followed.

Several unions, including the country’s biggest, did not take part, although all of them are gearing up for a months-long battle over efforts to raise the pension age.

Macron made raising the retirement age from its current level of 62 one of the key planks of his re-election campaign, arguing that the current system was unsustainable and too expensive.

“All the unions in France are against working up to 64 or 65 years. Because it’s stupid,” the head of the CGT union, Philippe Martinez, told France 2. 

Left-wing political parties have called their own separate rallies on October 16 to demand pay rises and an end to the planned pension changes.

Though known to be in a rush to push through the changes, Macron’s Prime Minister Elisabeth Borne announced Thursday that the government would spend another few months in consultations.

“There are important questions we want to open talks about” with other political parties, unions and employers’ groups, Borne told AFP.

“We’re starting from the assumption that we’ll be able to hold a dialogue,” she added.

A bill would be voted on “before the end of the winter”, she promised.

– Fresh elections? –

With deficits spiralling and public debt at historic highs, Macron views pushing back the pension age as one of the only ways the state can raise revenues without increasing taxes.

But his centrist party lost its majority in parliament in June, severely undermining his ability to make changes.

“If the president insists on declaring a social war on the people, we will respond with all the means at our disposal,” the parliamentary leader of the hard-left France Unbowed (LFI) party, Mathilde Panot, warned on Wednesday.

Labour Minister Olivier Dussopt said that the 44-year-old head of state would not hesitate to call fresh elections if opposition parties voted down the government over the reform.

“If all of the opposition comes together to adopt a vote of no-confidence and brings down the government, he (Macron) will let French people decide and say what sort of a majority they want,” Dussopt told the LCI channel. 

No opposition party has pledged to support the centrist minority government so far, but the conservative Republicans party might still be persuaded, observers say.

– Stoppages – 

The strike on Thursday was followed by about one in ten teachers, according to the education ministry, leading to school closures in some areas.

One in three railway workers also stopped work, according to the CGT, leading to major cancellations on key routes including Paris-Bordeaux.

The biggest of around 200 protests nationwide was expected to draw 3,000-6,000 people in Paris on Thursday afternoon, according to a police source.

Around 4,300 people marched in the southern city of Marseille. 

The strikes and demonstrations were small by historic French standards and even the last round of protests against pension reform in 2019. 

Hundreds of thousands marched in 2019 and a four-week strike on Paris transport crippled the metro system in what was the longest stoppage in decades.

“I don’t know anyone who wants to work for longer, but I don’t know anyone who thinks they are not going to work for longer,” a minister close to the president told AFP last week on condition of anonymity.

“Maybe I’m mistaken, but I’m not sure that the turnout will be as large as the unions and LFI are hoping for,” the minister said of Thursday’s day of action.

burs-adp/sjw/imm

The Swiss franc is breaking records against the euro, giving the Swiss economy a temporary boost as central banks battle inflation — although experts remain cautious about the months ahead.

Seen as a safe haven, the Swiss currency briefly hit a high of 0.94 francs to the euro on Monday following the Italian general election.

While it has since eased back a little, it is nevertheless at the highest levels since the launch of the single currency more than 20 years ago, outside a brief flash crash in 2015.

“It’s more about the weakness of the euro than the strength of the Swiss franc,” Credit Suisse economist Maxime Botteron told AFP, citing the franc’s steadier performance against the US dollar.

“European growth is showing signs of running out of steam, even recession,” he said, noting that “these indicators come in a context where the Swiss National Bank (SNB) has changed its monetary policy”.

Switzerland’s central bank has abandoned the negative rate it has imposed since 2015 to combat the overvaluation of its currency.

Like other central banks, the SNB seeks to prevent inflation from taking root. But in the midst of soaring energy prices, the franc’s rise is providing it with welcome help in curbing price increases.

“In Switzerland, two-thirds of inflation is due to imports. An appreciation of the Swiss franc therefore reduces the rise of these goods a little,” said Botteron, adding that the SNB “therefore has less need to tighten monetary policy” than other central banks.

In August, inflation rose to 3.5 percent, its highest level in 29 years, but far behind the 9.1 percent recorded last month in the eurozone.

– Tourism boost – 

“There is a very clear strategy to shield Switzerland the against the rising inflation coming from the eurozone, the US and other trading partners,” said Thomas Flury, UBS bank’s global head of currency strategy.

The franc’s rise has not triggered panic, unlike in 2015 when exporters feared their production costs and export prices would explode.

“High inflation in the eurozone makes the real appreciation much less dramatic than in the past,” said Flury.

“Acceptance is coming because companies in Switzerland would rather have a stronger Swiss franc than discussions on wage rises that French or German companies will have to do, as well the cost pressures from imports.”

If this rise in the franc eases somewhat the pressure on their imports, Swiss companies, with well-filled order books, also have some leeway to increase their prices, said Botteron.

In tourism, another sector sensitive to the exchange rate, the franc’s rise has enabled Swiss hoteliers to increase their prices to a lesser degree than in neighbouring countries given the lower inflation, a spokesman for the Hotellerie Suisse hotel industry body told AFP.

“For hoteliers, this means that they should become even more competitive against foreign countries,” he explained.

As Switzerland nevertheless remains an expensive destination, the group remains cautious, fearing that “consumer budgets will tighten”.

However, this boost to the Swiss economy may only be short-lived.

“We’ll have to see how this develops over the winter,” said Flury.

Even if it is too early to guess how the exchange rate might develop, recession or weak growth in the European economy would hamper Swiss companies and the franc’s value may become a much more sensitive subject.

The French government vowed on Thursday to push through pension reform by the end of the winter despite fierce opposition from unions whose first major day of strikes failed to have much impact.

A nationwide day of stoppages called by the CGT union on Thursday — the first since President Emmanuel Macron was re-elected in April — caused some disruption, but was not widely followed.

Several unions, including the country’s biggest, did not take part, although all of them are gearing up for a months-long battle over efforts to raise the pension age.

Macron made raising the retirement age from its current level of 62 one of the key planks of his re-election campaign, arguing that the current system was unsustainable and too expensive.

“All the unions in France are against working up to 64 or 65 years. Because it’s stupid,” the head of the CGT union, Philippe Martinez, told France 2. 

Left-wing political parties have called their own separate rallies on October 16 to demand pay rises and an end to the planned pension changes.

Though known to be in a rush to push through the changes, Macron’s Prime Minister Elisabeth Borne announced Thursday that the government would spend another few months in consultations.

“There are important questions we want to open talks about” with other political parties, unions and employers’ groups, Borne told AFP.

“We’re starting from the assumption that we’ll be able to hold a dialogue,” she added.

A bill would be voted on “before the end of the winter”, she promised.

– Fresh elections? –

With deficits spiralling and public debt at historic highs, Macron views pushing back the pension age as one of the only ways the state can raise revenues without increasing taxes.

But his centrist party lost its majority in parliament in June, severely undermining his ability to make changes.

“If the president insists on declaring a social war on the people, we will respond with all the means at our disposal,” the parliamentary leader of the hard-left France Unbowed (LFI) party, Mathilde Panot, warned on Wednesday.

Labour Minister Olivier Dussopt said that the 44-year-old head of state would not hesitate to call fresh elections if opposition parties voted down the government over the reform.

“If all of the opposition comes together to adopt a vote of no-confidence and brings down the government, he (Macron) will let French people decide and say what sort of a majority they want,” Dussopt told the LCI channel. 

No opposition party has pledged to support the centrist minority government so far, but the conservative Republicans party might still be persuaded, observers say.

– Stoppages – 

The strike on Thursday was followed by about one in ten teachers, according to the education ministry, leading to school closures in some areas.

One in three railway workers also stopped work, according to the CGT, leading to major cancellations on key routes including Paris-Bordeaux.

The biggest of around 200 protests nationwide was expected to draw 3,000-6,000 people in Paris on Thursday afternoon, according to a police source.

Around 4,300 people marched in the southern city of Marseille. 

The strikes and demonstrations were small by historic French standards and even the last round of protests against pension reform in 2019. 

Hundreds of thousands marched in 2019 and a four-week strike on Paris transport crippled the metro system in what was the longest stoppage in decades.

“I don’t know anyone who wants to work for longer, but I don’t know anyone who thinks they are not going to work for longer,” a minister close to the president told AFP last week on condition of anonymity.

“Maybe I’m mistaken, but I’m not sure that the turnout will be as large as the unions and LFI are hoping for,” the minister said of Thursday’s day of action.

burs-adp/sjw/imm