What a difference a decade makes.

Ten years ago, when Europe was in the throes of the eurozone crisis, Germany led the drive for austerity.

Now the rest of Europe is fuming about Germany’s heavy spending on energy subsidies that they fear could exacerbate the Continent's politically explosive rich-poor divide.

It hardly helps these growing tensions that it was Berlin's misguided dependence on Russian gas that helped trigger the bloc's energy crisis in the first place.

Dissent is growing in the EU — particularly in heavyweights such as Italy and France — about Germany’s massive €200 billion package announced last week to cushion consumers and businesses from the full effects of the energy crisis.

These grievances now look likely to flare at Friday’s EU summit in Prague, when leaders will tackle the issue of rising energy costs and their economic ramifications. 

“Germany has shown a big middle finger to the rest of Europe with this package,” said one EU official. “That has really raised the temperature with the other countries.”

Germany's deep pockets are a long-running bone of contention that also stoked problems during the coronavirus pandemic, when countries poured billions in rescue funds into their economies.

The criticism is that Germany's massive financial firepower allows it to bail out its economy, while poorer nations crack, opening up major divisions in the single market as German companies win a state-funded advantage over rivals elsewhere.

Nations say Germany has a burden of responsibility to show solidarity and not just look after itself — not least because of Berlin's role in helping Gazprom establish dominance in Europe, and because Germany's pursuit of new gas supplies is driving prices up for everyone.

"The Germans are more worried about the supply of gas than the price, but for the other 26 countries it is not like that," Italian Energy Minister Roberto Cingolani told Rai TV on Sunday.

In a slap on the wrist for the German go-it-alone approach, the European Commission on Monday also called on countries to coordinate their rescue measures and avoid undermining the single market.

“Actions taken at national level have important spillovers on other member states, so a coordinated approach at the European level is more crucial than ever,” EU Economy Commissioner Paolo Gentiloni said on Monday following a meeting of finance ministers.

Even Italy's outgoing Prime Minister Mario Draghi issued a rare rebuke of Germany.

“We can’t divide ourselves according to our fiscal room for maneuver, we need solidarity,” he said late Thursday.

Guido Crosetto, co-founder of Brother of Italy, the party which is expected to lead the next Italian government, said on Twitter that Germany’s decision “Not agreed, not shared, not communicated, threatens at the roots the rationale of the Union.” 

Paris also sounded annoyed.

“It is essential that we preserve the level playing field between the eurozone member states and between member states in general,” said France’s Finance Minister Bruno Le Maire, on his way into a meeting of eurozone finance ministers in Luxembourg Monday. 

“If there is no consultation, if there is no solidarity, if there is no targeted support for business, if there is no respect for the level playing field, we risk the fragmentation of the eurozone.”

Adding fuel to the fire, the fact that Germany is blocking calls for an EU-wide gas cap to tackle the energy crisis is also not bolstering its cause among other countries.

Old habits die .... fast

Having been the poster boy for strict fiscal rectitude, insisting that austerity measures were part of the conditions of bailouts for countries such as Greece, Portugal and Ireland during the eurozone crisis, Berlin is now presiding over an eye-watering spending package.

Even Germany’s own Federal Audit Court criticized the financing of the plan which appears to fly in the face of decades of German fiscal conservatism. 

The announcement of the new package comes just weeks after German Finance Minister Christian Lindner said that Germany and the EU must return to strict fiscal discipline.

But when it comes to the energy largesse, Lindner defended the move in Luxembourg on Monday.

“The measures are proportionate to the German economy and until the year 2024, and in line with what others in Europe are doing,” he said.

Source | Politico