Does everybody know this?
Scholz is taking warmth for his authorities’s €200 billion subsidy program for power costs and its potential beggar-thy-neighbour results. He mentioned “I’m positive that everybody is aware of that such measures are essential and must be taken in every single place.”
The issue is that some nations cannot afford it; or they will not be capable of afford it over time. The ECB is slowly pulling the rug out from beneath the European bond market and there are going to be some onerous classes and selections.
Scholz emphasised that Germany is economically robust and might afford it. That is true but it surely’s not the case in every single place and plenty of nations do not realize how lengthy this may take to repair.
Europe is speaking about some type of gas-buying cartel with Korea and Japan however that is a pipe dream. Oil may be a recent headwind and a diesel scarcity looms. With Nordstream now destroyed, there is not any repair for 2023 and materially much less provide out there.
Some joint power procurement may assist however LNG is in demand everywhere in the world and there is not a lot provide coming on-line till 2025-26.
Scholz can also be speaking about long-term LNG procurement but additionally about getting off fossil fuels. Exporters need 30-year contracts and the EU does not like that concept so there’s some actual dissonance right here.
One bit of fine information is that TTF costs have come down however I think that can solely final so long as there is not any name on provide from chilly climate.
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