Right now, the sobering truth is that the future of Europe hinges on the weather. It seems absurd. But whether the winter ahead is cold or warm will determine if Europe gets through the next six months without major economic, political, and social stress.
We are in this situation because, thanks to the clash with Russia over Ukraine, Europe has lost roughly a third of its regular gas supply. Much of Europe, particularly in the former Soviet bloc, relied on Russian gas for electricity generation, home heating, cooking, and industrial purposes. Germany and Italy, the largest and third-largest economies in the Eurozone, were also heavily dependent on Russian gas.
Since the spring, as the scale of the conflict became clear, Europe has been bracing for the worst. While buying as much Russian gas as it can, Europe has been scrambling to sign new gas deals and make up the impending shortfall by buying up cargos of liquefied natural gas, or LNG. Over the summer, as Russia’s situation became more dire, deliveries of Russian gas slowed to a fraction of their normal level. Europe’s purchasing went into overdrive, pushing gas prices to extraordinary levels—equivalent to roughly $400 per barrel of oil or more. As a result, the gas storage facilities are now full. Gas prices, at least for the next few months, have plunged. There is simply nowhere to put more of the stuff. It’s now the daily charges for LNG tankers that have gone through the roof, as shippers wait offshore for European demand to return. It is only a matter of time. The gas storage facilities are sufficient to cover no more than a few months. Gas prices for next year and for the foreseeable future remain severely elevated—in the $200-per-barrel range, around 8 times their precrisis levels. With no prospect of a resumption of Russian gas deliveries in sight, the outlook is grim—unless, that is, the weather stays warm.
Weather has mattered in modern European history before. A freezing winter in 1946-47 brought Europe to a standstill and helped to trigger Washington into launching the Marshall Plan. But that was in the immediate aftermath of World War II, when the continent was in ruins. For Europe in the third decade of the 21st century to find itself at the mercy of the weather truly comes as a shock.
Of course, as the saying goes, Europe is forged in crisis and consists largely of the sum of the solutions found to those crises. But when Jean Monnet, one of the architects of European integration, made that famous declaration in 1976, he can hardly have expected a severe cold snap or an unusual warm spell to swing the history of the continent. Even former European Commission President Jean-Claude Juncker, when he used the term “polycrisis” to describe Europe’s situation in 2016, cannot have imagined a moment as precarious as this. He was thinking of the Syrian refugee crisis, the Eurozone debt crisis, and the Russian annexation of Crimea. The difference is that throughout the first clash over Ukraine, Russian gas continued to flow.
In the worst-case scenario, if the thermometer plunges in the next few months, several European countries could be forced to impose gas rationing. Even with good weather, the outlook for next year is alarming. The concerns are not merely prospective. With energy prices currently hovering around five times their precrisis levels, energy-intensive industries such as fertilizer and aluminum are already shutting down. Under the pressure of the shock, the energy supply chain in Europe is fracturing. Energy supply companies have found themselves caught between fixed-price contracts with their customers and soaring gas and power costs. It turns out that there is maturity mismatch, one of the boogeymen of the financial crisis of 2008, at the heart of the energy supply system. Either supply companies breach their contracts, or they pile up gigantic losses that bring them to the brink of bankruptcy—or a bailout. The nationalization of Germany’s Uniper has already cost the taxpayers billions of euros.
To mitigate the damage to households and businesses, Europe’s governments have launched a variety of programs to stabilize prices. The details are mind-bogglingly complex and contentious. Germany agreed, only very reluctantly, to the idea of a maximum price for European gas purchases. As its government points out, it will work only if demand does not surge elsewhere. With Italy, France, and Spain taking the initiative early in the crisis to introduce national support programs, and Germany following suit with its own gigantic energy package, there has been little European coordination. The only thing that is clear is that effective programs are going to be very expensive. The German package is touted as costing 200 billion euros. On top of earlier German support programs, the total bill could run to 5 percent to 6 percent of its GDP—a lot even for a country of Germany’s fiscal capacity.
Europe has a track record of big crises with big bills. But this one is particularly tricky to handle. After the banking crises of the late 2000s, Germany did not want to foot the bill for a common bank insurance fund to support weaker banks in Italy and Spain. But at least those countries’ efforts to support their own ailing banks made Germany’s banks more, rather than less, safe. The opposite is precisely the situation regarding energy subsidies. Uncoordinated gas stockpiling by the richest consumers prices poorer consumers out of the market to the benefit of speculators. In this regard, the measures taken so far to meet the crisis are akin to vaccine nationalism or protectionist policies to horde limited supplies of personal protective equipment.
Back in 2020, in the first months of the COVID-19 pandemic, it seemed as though Europe might fail to agree to a common pandemic plan. French President Emmanuel Macron spoke of a “moment of truth” for the EU. A deal was done for common borrowing to fund national government spending. Europe also adopted an impressively coordinated approach to vaccine procurement and distribution. It was cumbersome but addressed basic issues of equity. More than eight months on from the start of Russia’s attack on Ukraine, the prospects for a similar deal to face the energy crisis are very uncertain.
Crucially, the common response to the COVID crisis depended on an agreement between France and Germany. With the help of their finance ministries, then-German Chancellor Angela Merkel and Macron reached a deal on EU borrowing. Today, relations between France and Germany are at their lowest in recent memory. German Chancellor Olaf Scholz and Macron have a frosty working relationship. They are split over the gas-price-cap proposal, with France favoring more dramatic measures. They are split over the proposal for a gas pipeline to connect the Spanish and Portuguese LNG gasification terminals with the rest of Europe. France has effectively vetoed the plan. In February, when Germany announced its much-heralded defense-spending package, Paris was dismayed by the fact that the first big-ticket purchase went on U.S. F-35s, rather than a European alternative. More recently, Germany launched a new missile and air defense program without prior consultation with France, which left Paris fearing that Berlin now sees its future as the protector and patron of its Eastern European neighbors.
Most fundamentally, to address the escalating costs of the energy crisis and the financial legacies of COVID, Paris would like to renegotiate Europe’s fiscal architecture, including the question of common European borrowing. Scholz initially gave some indication that he was open to this discussion, only for Germany’s finance minister, Christian Lindner, of the Free Democratic party, to issue a firm “Nein”, both on common borrowing and on any fundamental redesign of the Stability and Growth Pact, the agreement that disciplines national fiscal policy in the Eurozone.
As Lindner points out, France can currently borrow at more attractive interest rates than Brussels. However, as everyone knows, that is not the point. The countries that need the protection of a common-borrowing scheme are Greece, Spain, and above all, Italy.
For a long time, liberals and progressives have worried about the rightward drift of Italian politics. Now, following the September 2022 elections, Rome has seen the inauguration of a far-right government headed by Giorgia Meloni of the Fratelli d’Italia, a party descended from a post-fascist lineage. By bitter coincidence, they took office just as Italy’s most diehard post-fascists have been celebrating the centennial of Mussolini’s march on Rome.
In choosing her ministerial team, Meloni seems to have been at pains to avoid provocation on economic and financial affairs. The finance minister, Giancarlo Giorgetti, is from the business wing of the Lega. He is the only holdover from the Draghi cabinet and more pro-European and pragmatic than Matteo Salvini, his party boss. But, for all his alleged moderation, a showdown with an outspoken German finance minister is red meat for any Italian nationalist. It would also suit Lindner, whose party is under pressure in the polls. If Scholz does not take charge of the issue, a clash between Italian and German finance ministers could spiral into the crisis that the rest of Europe fears. Even if the financial issue can be settled, Meloni’s picks for the rest of the cabinet are much less conciliatory. The stage seems set for clashes between Rome and Brussels over issues including immigration, climate change, and reproductive rights.
Among Europe’s nightmares is now the prospect that Italy under Meloni could become a second Poland, challenging the cohesive value system of the EU precisely at the moment that Brussels is seeking to consolidate a solid front against Russian President Vladimir Putin.
Poland, as a nonmember of the Eurozone, is not integral to the functioning of the EU in the way that Italy is. But Warsaw has acquired huge new significance as a frontline state in the confrontation with Russia. It is positioning itself to take full advantage of this leverage by dramatically raising its defense spending and cultivating its role as one of the United States’ most active allies within NATO. Despite Brexit and the shambles in London, Putin has helped to forge a new axis that runs from Washington via London to Warsaw. As if to emphasize the historic resonances of this axis, Poland’s nationalist parliamentarians have picked this moment to reopen the issue of reparations for the genocidal atrocities perpetrated by Germany in World War II.
Europe is embroiled in an ongoing and unpredictable war in which Putin’s Russia must not be allowed to prevail. Its basic energy supply is in doubt. In Germany, Italy, and Poland, the issues at stake are as much political as diplomatic, technical, or economic. This makes the resolution of the current crisis far more intractable. When Monnet declared that Europe would be forged in crisis, he not only assumed that there were, in fact, solutions to be forged, but he also assumed that those forging the European answers would be its civil servants and elite decision-makers. Operating independently of popular politics, they would find their way toward satisfying the functional imperatives of the moment. That model of European institution-building has been in doubt arguably since the French and Dutch referenda of 2005 shot down the proposal for a European constitution. This does not mean that progress toward “ever greater union” is impossible. 2020 proved the contrary. But it requires complex intergovernmental bargains. As winter approaches, the signs for such a deal in the present crisis seem anything but good.
It is not for nothing that Europe’s governments are looking to the weather. The one bit of good news is that the long-range forecasts look favorable. Perhaps unseasonable warmth will buy Europe’s politicians the time they need. If the thermometer drops, however, the pressure on Europe’s capitals will become intense.
Adam Tooze is a columnist at Foreign Policy and a history professor and director of the European Institute at Columbia University. His latest book is Crashed: How a Decade of Financial Crises Changed the World, and he is currently working on a history of the climate crisis.