EU Commission President Ursula von der Leyen on Wednesday announced a legislative proposal to impose windfall levies on energy companies as the EU grapples with surging gas and power prices that threaten economies and households.

The levies could make more than €140 billion available for EU member states to support struggling families and businesses, she told the European Parliament in Strasbourg during her annual State of the Union address.

“In these times, profits must be shared and channeled to those who need it the most,” von der Leyen said in Strasbourg.

Von der Leyen’s plan, which has yet to be approved by EU capitals, focuses on two measures: capping revenues of low-cost electricity producers as well as charging fossil fuel companies a crisis contribution.

The first measure is to apply to non-gas electricity producers, including renewable energy providers that have been profiting disproportionately from the high prices in recent months.

The second measure, the crisis contribution, is targeted at fossil fuel companies that are currently making excess profits.

Other steps laid out by von der Leyen include rationing energy, temporary state aid and decoupling the prices of gas and electricity. The European Commission presented its legislative proposal to tackle rising energy prices in detail on Wednesday.

Not a done deal yet

“I am very happy that it has finally been decided to reform the electricity system, so that the price of gas does not determine the price of all electricity at certain times. We now have to take urgent measures,” the EU’s High Representative for Foreign Affairs and Security Policy, Josep Borrell, told EFE after attending the debate in Strasbourg.

The measures proposed on Wednesday will be scrutinized and potentially amended by member states before they can come into force. EU energy ministers are set to meet again on September 30.

No price cap on Russian imported gas

Energy measures mooted ahead of von der Leyen’s speech included a price cap on imported Russian gas. On that point Europe’s chief diplomat Borrell noted that “the unanimity of all the Member States is required.”

“The President did not propose it. She has talked about it, but she has not formally proposed it, because she knows the political difficulties that exist,” Borrell pointed out.

EU countries are also wary of giving the Commission too much power over their national energy policies, even though they have already been swept up in a bloc-wide push towards renewables as part of a carbon-neutral future.

Borrell recalled that the EU has already reduced its dependence on Russian gas “from 40 percent of our imports before the war, to less than 10 percent now.”

Ukraine: Difficult times ahead

Von der Leyen warned of difficult times ahead, referring to the economic consequences of the war in Ukraine.

“The moments ahead of us will not be easy. Be it for the families who are struggling to make ends meet or businesses who are facing tough choices concerning their future,” von der Leyen told lawmakers.

“Let us be very clear. Much is at stake, not just for Ukraine, but for all of Europe and the world at large,”

von der Leyen added.

“This is not only a war unleashed by Russia against Ukraine. This is also a war on our energy, it’s a war on our economy, it’s a war on our values, it is a war on our future,” von der Leyen said.

Ursula von der Leyen’s trip to Ukraine

Speaking in the presence of Ukraine’s first lady Olena Zelenska and dressed in blue and yellow, the colours of Ukraine’s flag, von der Leyen announced her travel to Kyiv later that day. After the speech she went on her third visit to the Ukrainian capital since the start of the Russian invasion.

She said she would discuss Ukraine’s integration into the European Union’s single market with Ukrainian President Volodymyr Zelensky. The European single market guarantees the free movement of goods, capital, services and people. Von der Leyen also proposed to include Ukraine in the bloc’s free roaming zone for mobile device users.

More flexible budget rules to be proposed by October

Turning to other issues the Commission president said she backed  calls for making the bloc’s joint budget rules more flexible.The EU’s strict rules for fiscal discipline and budget deficits are suspended until 2024 because the Covid-19 pandemic prompted even frugal countries like Germany to take on large amounts of public debt.

Von der Leyen said the new rules, which the Commission is due to propose in detail in October, should allow needed investments in “the transition to a digital and net zero economy” while giving EU capitals more ownership in reducing their public debt reliably.

Shield against “malign interference”

In her speech von der Leyen revealed a package on Defence of Democracy in order to “better shield ourselves from malign interference”. She added: “It will bring covert foreign influence and shady funding to light. We will not allow any autocracy’s Trojan horses to attack our democracies from within”.

Her announcement came as a US intelligence report on Russian funding of foreign political parties hit the campaign for Italy’s September 25 general election. According to the report, Russia has given over $300 million (€ 300,54 million) to foreign political parties, officials and politicians in more than 20 countries since 2014.

“The US intelligence report shows how Russia’s influence in Western politics works at various levels and in sprawling ways, up to the funding of some political parties,” said European Parliament Vice President Pina Picierno, urging “to keep our guard up” as “Putin wants to destabilize democracies and the free world, directly supporting some political parties”.

“We must firmly respond to the constant Russian meddling in our democracies, as the Ukrainians’ fight is our fight, their victory against Putin will be our victory,” MEP and EDP Secretary General Sandro Gozi said, commenting on the speech.

Promise to protect rule of law

Alluding to the Commission’s ongoing disputes with Hungary and Poland, von der Leyen said it was the Commission’s “duty and the most noble role to protect the rule of law.”

“Let me assure you that we will keep insisting on judicial independence,” she noted.

Praise and criticism for the plans

In their reactions to von der Leyen’s speech, the majority of the parliamentary group leaders welcomed the proposals to overcome the energy crisis. Manfred Weber, leader of the strongest EPP group, expressed his “full support” for Ursula von der Leyen’s content of the plans, but criticized the procedure and appealed for the EU Parliament to be more involved in the decision-making process. Socialists criticized the lack of social aspects in the speech. S&D Group leader Iratxe Garcia Perez wrote on Twitter, “We heard fancy words by Ursula von der Leyen, but the social dimension was neglected.”  The Left Party also voiced criticism after the speech. Co-chair Martin Schirdewan told dpa that Ursula von der Leyen had “more than clearly demonstrated that the title of ‘announcement world champion’ will not be taken away from her in her lifetime.

Slovenian Infrastructure Minister Bojan Kumer welcomed the latest measures to tackle the energy crisis that were announced by Ursula von der Leyen. Kumer told RTV Slovenija on Wednesday evening that solidarity among EU members had been clearly expressed, “especially in the energy market,” noting that a joint European solution was far better than 27 different national solutions. He welcomed the measures to curb electricity prices that were outlined by von der Leyen in her State of the Union address on Wednesday, saying that the proposal would be carefully examined in the coming days. At first glance, it seems to include a number of solutions advocated by Slovenia too, he added.

Slovenia’s MEPs said von der Leyen managed to list the main challenges of the bloc in her speech. However, they believe she left out a number of key issues, especially concrete short-term measures to help people overcome the economic and energy crisis.

Waiting for the plans

Romanian Prime Minister Nicolae Ciucă declared earlier that through the changes proposed to an ordinance (OUG 27/2022), the Romanian government wanted to consolidate and expand the measures to protect the population and the economy against the price increases recorded for electricity and natural gas. He announced that the Romanian scheme of capping and invoice compensation would remain in force until March 31, 2023, and that the overtaxation targeted the entire energy chain, not just the producers, with measures intended to discourage speculative behavior in the electricity and natural gas market.

At the same time, he stressed that Bucharest was ready, depending on the decisions adopted at EU level, to adapt its own measures  accordingly.

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