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EUROPEAN UNION

EON sells network to avoid EU wrath

German power company EON will sell one of its networks to appease an EU request that aims to stimulate competition in the European energy sector.

EON sells network to avoid EU wrath
Photo: dpa

EON said Thursday it is ready to sell its transmission network, bowing to pressure from Brussels and putting it at odds with Berlin on how to liberalise Europe’s energy sector.

The company has fallen foul of European regulators over its market dominance, said it was now ready to sell its transmission network — but only to a non-competitor — along with 4,800 Megawatts of generation capacity to rivals.

The European Commission, which confirmed receiving EON’s plans, intends to market test the proposals and if they are successful, it “would not pursue the current anti-trust cases,” a statement from the company said.

“The European Commission welcomes these proposed commitments in so far as they could remedy the concerns that it has regards EON,” EON said. “These proposals, if adopted, would structurally change the electricity sector in Germany and could spur competition in the sector to the benefit of domestic and industrial customers.”

Earlier, a German government spokesman told AFP that EON head Wulf Bernotat had informed Chancellor Angela Merkel of the company’s intentions.

The move, however, puts EON at odds with the government which along with France and six other EU members had been pressing for Brussels to explore other ways to liberalise the continent’s electricity and gas sectors. They support a less drastic proposal whereby companies could be split up into affiliates with separate managements but remain within the parent group, in marked contrast to the EU’s preference for the simple sell-off that EON has now agreed to.

According to business daily Handelsblatt, three other major German power companies — RWE, EnBW and Vattenfall — were also in intensive talks on the sale of their distribution networks.

Recent years have seen a flurry of mega-mergers and acquisitions in the European energy industry but Brussels is worried that the resulting small number of very large firms such as EON stifles competition. For Brussels, big integrated energy companies that control the distribution networks inevitably means less competition in the market, a point consumer groups have made increasingly as power costs have risen sharply.

Brussels hopes that by separating power generation from power transmission it will free up the market and stimulate Europe’s economy by making electricity and gas cheaper for consumers and businesses. It also wants governments to become more willing to invest in new power stations and infrastructure to ensure supply keeps up with demand.

Earlier this week the head of RWE, another German power giant, said Europe faced blackouts lasting days at a time later this year because of a lack of power stations.

For its part, France has warned that the shake-up could in practice reduce competition and French European Affairs Minister Jean-Pierre Jouyet has attacked the Commission’s proposals as being driven by the “ideological position” of certain officials such as Competition Commissioner Neelie Kroes. There are also concerns that non-EU firms such as Russia’s Gazprom could snap up European assets as a result while EU firms would not be able to make acquisitions in Russia. German power company EON will sell one of its networks to appease an EU request that aims to stimulate European energy competition.

EUROPEAN UNION

The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.

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