Tuesday

5th Jul 2022

Lagarde urges EU to use market power to fix gas price

  • Christine Lagarde said inflation may be higher because of gas prices, but expects inflation to go down next year (Photo: Council of the EU)
Listen to article

European Central Bank (ECB) president Christine Lagarde on Monday (27 September) said inflation may be above the two-percent inflation target for the remainder of this year, at her quarterly meeting with MEPs from the economics committee .

Inflation hit three percent in Europe recently, with rising energy prices and higher costs for materials due to supply delays named the most important causes.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Lagarde said there is "every reason to believe" that the rebound in energy prices and supply bottlenecks would ease next year.

When pushed on the risks of higher energy prices by Eva Kaili, S&D MEP, Lagarde confirmed that energy prices are an inflation concern, and could raise inflation to a somewhat higher level in the medium term.

But having said this, she pointed out that energy prices are mainly determined by factors outside of the ECB's monetary mandate.

"Less wind resulted in less energy generation by wind farms," she said. In addition, heatwaves in the south of Europe also played "a key role in higher energy prices."

She added that "fiscal authorities" (ie governments) have a responsibility to "harness market power" to arrange better prices and referred to a plan "one of the member states" recently put forward that might "rebalance other market forces."

Although not mentioned by name, Spain has led recent calls for the EU to organise a more coordinated response to the energy price spikes.

"We urgently need a European policy menu predesigned to react immediately to dramatic price surges," Spain's economy minister Nadia Calvino and energy and environment minister Teresa Ribera wrote in a joint letter addressed to the commission.

They asked the commission to restrict the participation of certain traders in the EU carbon market, warning of the risk that "financial speculation rather than real factors drives prices up too quickly".

In the letter sent on 21 September, the ministers also called for establishing a centralised European platform to buy gas, countering the bloc's exposure to fluctuating international markets.

The commission confirmed it had received the letter and said it would reply in due course.

On 22 September, energy commissioner Kadri Simson told a press conference that the EU has to lessen its dependence on imported fossil fuels - half of which comes from Russia.

"Today's situation underlines that we have to end our dependence on foreign volatile fossil fuels as soon as possible."

Although no specific policy measures have been announced to address this issue, the commission has said it will devise a "toolbox" for member states to address price surges.

Opinion

Lagarde's ECB must modernise

Christine Lagarde will succeed European Central Bank president Mario Draghi at a time of deepening polarisation among eurozone member states. It will take all of her skills as a leader and communicator to safeguard the institution's independence.

Opinion

Why did gas prices suddenly spike?

The 29 September historic high of $1,000 per thousand cubic metres for natural gas is not likely to be the final one this year, as European economies are still in desperate need to fill their storage facilities before winter.

Nine countries oppose EU gas market reform

Germany, the Netherlands and Denmark and six other countries have signed a letter saying they cannot back any reform of the EU gas and energy markets.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. ECB announces major green shift in corporate bond-buying
  2. Ex-Frontex chief 'uninvited' from parliament committee
  3. Czech presidency and key nuclear/gas vote This WEEK
  4. The human rights aspects of Grenoble's 'burkini' controversy
  5. Council must act on core of EU migration package
  6. Nato's Madrid summit — key takeaways
  7. Czech presidency to fortify EU embrace of Ukraine
  8. Covid-profiting super rich should fight hunger, says UN food chief

Join EUobserver

Support quality EU news

Join us