A giant flame burning outside St Petersburg, big enough to be seen from Finland, captures Europe’s challenge as autumn approaches: Vladimir Putin burns gas as the continent prepares for a winter of discontent triggered by record high energy prices.
Putin’s attack on Ukraine highlighted the need for more pan-European public goods and joint action, especially for energy security and independence. This reinforces an awareness that was already seeping into political consciousness thanks to the pandemic and the climate crisis.
But the next six months will test the leaders’ best intentions politically and economically. The need to do more together comes just as national politicians face the extreme temptation to become more inward looking. And governments will have to invest more money in the common good just as their economies worsen.
At home, every country is being rocked by high energy prices, and the demand to cushion the blow for voters and businesses will increasingly command political attention. It would be a mistake to let the cost of living crisis distract from aid to Ukraine, as it is largely caused by Putin’s weaponization of gas prices. But the temptation to do so, and the pressure to put one’s own country first, will only intensify as the suffering associated with rising energy bills worsens.
Then there are pre-existing frictions that undermine the EU’s ability to take collective action. The erosion of the rule of law in Poland and Hungary remains unresolved. The European Commission refused to approve the latter’s recovery plans and also launched its new instrument to withhold further budget transfers to Budapest. The Warsaw plan is approved but any disbursement is conditional on further concessions on its politicized judicial reform. Economic pressure may bring the two back into the fold, but it could also prompt them to play a bigger spoiler role.
Elsewhere, the political specters of the eurozone crisis have started to emerge again. Suspicions over how Italy is spending money from its recovery fund are not far below the surface. Grunts can be heard that Berlin has not given up its money-pinching instinct when it comes to EU financial aid to Ukraine. And in Spain, once hard hit by the crises but now relatively well placed with its large gas import capacity, politicians are struggling not to reverse Germany‘s old sermon, accusing it of living in above his means (energy).
Beyond politics, economic barriers to political action are also increasing. Getting Europe out of Putin’s energy manipulation will require investment to better connect the bloc’s energy infrastructure. But public and private finances will deteriorate.
Most growth indicators point in the wrong direction; simple stagnation would be a happy outcome. Even if Europe is spared from a pure and simple recession, Putin’s gas games impoverish it through very degraded terms of trade. Germany, of all countries, ran a trade deficit due to expensive gas imports. Add to that a monetary orthodoxy asking the European Central Bank to reduce aggregate demand, moderate wage demands and curb the (impressive) job growth in the euro zone.
This perfect storm creates a winter of division and therefore indecision. This is of course Putin’s goal. The aim of all of Europe must be to avoid it.
It is a good start that EU leaders are fully aware of their predicament. As all face energy crises at home, they understand the inner pressures on their counterparts. Some are trying to prepare voters for what is to come. But it will take great political skill to get such a message across to those who have long felt ignored by the abundance there could be.
Between EU countries, intriguing political reconfigurations are underway. Hungary’s friendship with Russia alienated it from Poland. This neutralized the Visegrad group, joining both Czechs and Slovaks, often opposed to Western Europe. The countries on the northern flank of the EU are awkwardly discovering that they cannot be defense hawks and budgetary hawks at the same time: if they want to invest more in Europe’s security, they must be open to more common spending or looser restrictions on national budgets.
They are at best indications of a more coherent policy. To achieve this and thwart Putin’s designs, government leaders must resist their instincts as mere national leaders. German Chancellor Olaf Scholz’s long-awaited speech in Prague on Monday is the best chance to give a solid lead. To say that this is a decisive moment for the future of Europe is perhaps an exaggeration. But only a slight.