Scholz Defends Massive Borrowing Plan to Tackle Energy Crisis

(Bloomberg)

German Chancellor Olaf Scholz pushed back against criticism that his government’s plan to borrow as much as 200 billion euros to tackle the energy crisis could put other European Union members at an economic disadvantage.Some of Scholz’s EU counterparts have said the plan aimed at shielding consumers and businesses from gas price spikes threatens solidarity in the bloc, risks distorting energy markets and may disrupt cross-border flows of power and natural gas.Scholz pointed to similar — if much smaller — proposals by other national governments and said the planned financing for Germany would be deployed gradually via yet-to-be-defined measures spread through 2024. Critics should also view the sum in relation to his country’s oversize role in the EU’s gross domestic product, he said.

“There is hardly a country that is not taking similar measures,” he told reporters in Prague on Friday following a two-day summit of European leaders. The chancellor said he used the talks to explain the debt-financing plan and to clear up misunderstandings.

Earlier this week, EU Internal Market Commissioner Thierry Breton and Paolo Gentiloni, the bloc’s economy chief, sounded the alarm over the plan. They argued that the energy crisis requires EU states to stick together, including by issuing jointly guaranteed debt similar to what they did during the Covid pandemic.

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Scholz last week presented the plan to keep power and natural gas prices in check. The Social Democrat Chancellor said the new off-budget stabilization fund would allow measures to put a “large protective umbrella” over Europe’s biggest economy.

Scholz dodged questions over whether Germany would support another round of jointly issued EU debt to finance measure to bring down energy prices in the bloc as a whole. He pointed instead to still unused loans and grants from the debt-financed EU pandemic recovery fund, of which only a fifth has been disbursed.

“So there are still a lot of resources available,” he said.