Friday, September 02, 2005

EU interferes with German Elections?

Very hard to prove but it is the only conclusion I can draw from a very strange little story today. On the front page of today's FT Germany there is a story about the German opposition leader Angela Merkle and her attempt to do something about the spike in petrol prices at the German pumps. Her suggestion? To tap into the German strategic oil reserves in order to cut off the spike while the markets are still panicking about hurricane Katrina. It seems an eminently sensible way to deal with the price volatility, indeed it is one of the four reasons generally stated for the maintenance of strategic oil reserves in the first place. This suggestion which was backed by the FDP's Westerwelle has since been turned down by Schroeder (though he has hinted that he might offer to release some of Germany's reserves in a "internationally coordinated" action.)
However what was really odd was the response of the European Commission.
Says the FTD,
"On Thursday the European Commission clearly rejected these plans, "a member state can not release its reserves not arbitrarily nor totally nor partly", the spokesman of energy commissioner Andris Piebalgs told the FTD. The reason: "The height of the reserves is regulated through the EU. Changes must be approved by the commission".

I checked this statement.
The Constitution, Part III, Article 256 states,
"Union policy on energy shall aim to:...
(b) ensure security of energy supply in the Union",
To do this it ahs turned what was a unanimity measure into a QMV (qualified majority vote) measure. (Hitherto energy policy was governed by TEC 308 / unanimity, this meant that essentially a government could what it wanted as it would always support its own position effectively vetoing any attempt to stop it. If QMV then permission would have to be granted by the Council).
This therefore made the spokesman's comments look distinctly threadbare. Was this another example of the Commission attempting to impose the rejected Constitution by stealth? But first some more checking, and sure enough in 2002 the Commission prepared a directive to take discretional control for the oil reserves.
This went, through co/decision to the European Parliament, where as the Karlsson report it was rejected in November 2003.Specifically over the issue of the Commission's attempt to gain "discretionary" control over the oil stocks.
Today I asked a friendly journalist to ask about this at the Commission press briefing. The spokesman in question was not available and the Commission flatly denied the story. What has happened though is that Ms Merkle has had a public slapping down by the Commission only a couple of weeks before the election.


eulogist said...

Hi there, your link to the Oeil fiche does not work: you gave the EU intranet address. Shows how much you have become part of the system already :-D

Anyways, the three Oeil fiches relating to this proposal can be found here, here and here.

Apart from that, is it really so bad if the Commission would gain discretionary control over oil reserves? I would say having this power is only normal, considering its role as regulator of the internal market. Surely, you would not want governments to interfere with the free interaction of market forces in the blatant way proposed by Ms Merkel? What if Pres Chirac would have done such a thing? Come on, be a good thatcherite... ;)

Gawain Towler said...

My dear, oops my drawers are showing... Don't think I pretend otherwise though, thanks.

Well I have hummed and haah'd about this, not just in relation to oil reserves, but things like the take over directive, and the absurd French defence of Danone as akin to their corporate family jewels. And my gut tells me that if people want to daft things with stuff that is theirs then they should be allowed to.
I have no doubt that the great ponds of crude, and in Germany's case I understand most of their reserves are pre-refined and thus instantly usable, have been bought by the German state, thus the German taxpayer. Therefore it is the business of the erman state (and by default taxpayer) to decide how the oil should be disposed.
If dampening down price volatility is banned because it would case ripples in the internal market then so be it.
You see I am a unilateralist when it comes to economics, I believe sucess will act as a draw, rather than attempts to control that seem inevitably to episodes like the stupidity pact.

Agammamon said...

I've been reading this and other blogs cataloging EU regulatory absurdities and one common thread through all of them is that EU regulations/laws are only problems for those countries that have a strong tradition of actually following the rules.

So I'm wondering, what exactly could Brussels do (assuming they even have the authority to forbid the release of German reserves) to Germany if they chose to ignore them?

eulogist said...

Elaib, your position would make perfect sense if it weren't for the common market. As long as it exists, it would be counterproductive to put market authority on a lower level (no matter what your position is on the issue of its existence).

BTW, I found this explanation of the current rules governing strategic oil reserves in the EU, i.c. Directive 98/93/EC amending the earlier Directive 68/414/EEC. It appears that the Commission may have been correct when it said Germany could not sell its reserves unilaterally, even under current rules, as Member States are required to keep oil stocks for 90 days and have to inform the Commission prior to selling them. Germany does not need the Commission's assent if it wants to sell its stocks until below the 90 days level, but it would be in breach of EU law if it did.
Also, German taxpayers (very probably) did not pay for Germany's strategic oil stocks, nor does the German state own those stocks. The stocks are kept and owned by oil companies, as required by law (at least that seems to be the situation reading those directives).