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BRUSSELS, June 24 (Reuters) – EU leaders will discuss on Friday how to respond to rising energy prices and the threat of a complete cut off of Russian gas, accusing Moscow of weaponizing energy through a supply squeeze that Germany has warned could partly shut down its industry this winter.

A day after celebrations for putting Kyiv on the path to bloc membership, Friday’s summit in Brussels turned into a sober reflection on the economic impact of Russia’s invasion of Ukraine. read more

Leaders of the 27-nation European Union, according to a draft summit declaration seen by Reuters, will blame a huge rise in prices and a drop in global growth on the war that began exactly four months ago.

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Following unprecedented Western sanctions imposed over the invasion, a dozen European countries have so far been hit by cutoffs to gas flows from Russia.

“It is only a matter of time before the Russians shut down all gas shipments,” an EU official said ahead of Friday’s talks.

German Economy Minister Robert Habeck warned that his country was headed for a gas shortage if Russian supplies remained as low as they are today, and some industries would have to close in winter.

“Companies would have to stop production, lay off their workers, supply chains would collapse, people would go into debt to pay their heating bills,” he told Der Spiegel magazine, adding that it was part of the Russian president’s strategy. , Vladimir Putin, to divide the country. . read more

The EU relied on Russia for up to 40% of its pre-war gas needs, rising to 55% for Germany, leaving a huge gap to fill an already tight global gas market.

‘GAS ARMAMENT’

According to a draft statement seen by Reuters, EU leaders will say that “in the face of Russia’s use of gas as a weapon”, the European Commission should find ways to ensure “supply at affordable prices”.

EU countries have already invested billions of euros in tax cuts and subsidies to combat rising energy prices.

But that comes on top of hefty bills for already stretched coffers, leaving many scrambling to find a solution, with EU countries disagreeing on a bloc-wide solution to tackle soaring prices.

Spain and Portugal capped gas prices in their local electricity market this month, but other states warn that price caps would disrupt energy markets and further drain state coffers if governments had to pay the difference between the cap price and the price in international gas markets.

“We need to start buying energy collectively, we need to implement maximum prices and we need to make plans together to get through the winter,” Belgian Prime Minister Alexander De Croo said on Friday as he arrived at the EU summit.

“If we don’t pay attention, the entire EU economy will go into recession with all its consequences.”

The bloc responded to the war with unusual speed and unity, but some sanctions, such as a planned embargo on Russian oil imports, are taking a toll on their economies.

Inflation in the 19 countries that share the euro has soared to record highs above 8% and the EU executive expects economic growth to fall to 2.7% this year.

Eurogroup chief Paschal Donohoe warned that the bloc must “recognize the risk we could face if inflation becomes embedded in our economies.”

“If inflation becomes a real and lasting part of our economies for years to come, the challenge we face with living standards and cost of living is only going to grow for years to come. It’s a very difficult challenge.”

Rome has asked EU leaders to meet again for an exceptional meeting in mid-July to discuss ways to deal with rising gas prices, but there are no plans to do so at the moment, a senior official said. the European Union.

However, another EU official said some EU leaders were considering the option of holding an additional summit in July to discuss broader economic issues.

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Reporting by Phil Blenkinsop, Marine Strauss, Bart Meijer, Francesco Guarascio, Kate Abnett, Jan Strupczewski; Additional reporting by Miranda Murray in Berlin, Gianluca Semeraro in Rome; written by Jan Strupczewski, Phil Blenkinsop, and Ingrid Melander; edited by John Chalmers, Sam Holmes and Alex Richardson

Our standards: The Thomson Reuters Trust Principles.

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