For a while we were led to believe that the US housing bubble burst was only a partial problem. Similarly, the following culminating infection that hit the banking industry was presented as a separate issue of financial markets. Only a year later is is obvious that the results of these crises go much deeper and affect all markets and segments of global economy. Economical balance should have been reestablished in 2010. Its absence only demonstrates the ambiguity of macro-economic approaches and the level of success or failure of adaptive measures.
T. Geither, former Secretary of Treasury claimed the US growth trajectory was reestablished in 2011 while the remaining stagnation of its main business partner – the EU – constitutes the only weak point. If the claim is true, there is no reason for optimism for the European community until this day. Expanding debt and budget deficits of PIIGS members (Portugal, Italy, Greece, Spain and Ireland) required massive bailouts. These financial resources were originally allocated for development investment within the EU.
Election results in Greece illustrate that even such fund allocation doesn’t always suffice to produce relevant results.
Global energy market development has not reached the EU mainstream. The Europe 20-20-20 package was introduced in EU before the energy crisis. Its targets aimed for a 20% reduction in EU greenhouse gas emissions and a 20% improvement in the EU’s energy efficiency while raising the share of EU energy consumptions produced from renewable sources in the same amount.
The EU expected Asian countries and US to follow a similar legislative alignment pattern by 2020 although the implementation of these targets requires substantial funding. It was a further assumption that a timely launch of this package will be key in terms of maintaining the competitiveness of the entire EU. Reasonably priced energy supply was supposed to remain one of main strategic targets after 2010. EU controls only a fraction of global oil, gas and coal reserves and it is increasingly more dependent on imports. 2014 imports made up to 50% of total country consumption. Not even a higher percentage of renewable energy sources across Europe was able to reverse this trend. Objectives set in the Green Paper Towards a European strategy for the security of energy supply indicate a 90% dependency on oil imports and 80% dependency on gas imports by 2030. Quick growth of Asian oil and gas consumption causing prices to rise was predicted. This would enable EU to efficiently decrease its dependency on imports through the 20-20-20 program, leading to a healthier competitiveness.
The European energy strategy has been on its knees in recent months. The Bent crude oil price plummeted by 50%, affecting prices of other energy commodities including electricity as well. It became obvious that EU doesn’t have the area or energetics under control. National selfishness regarding the security system of energy supply is more than evident. Security of energy supply had for a long time been the backbone of European competitiveness.
The reasons that led OPEC to oil overproduction, impacts of US fracking on global oil and gas markets and effects of long-term take-or-pay contracts on Russian purchase price levels do not matter within this context. More importantly we realize that the current European strategy turns out to be an obstacle on the way of development because of lacking structural changes. Recent months leave no doubts about European volatile economic balance even if fossil fuel prices start to rise and the market stabilizes once again. The geopolitical situation seems to be equally delicate as it often only serves to cover the struggle for control over strategic commodities. This way, it directly interferes with the economic and political interests of the EU.
Prof. Ing. Peter Baláž, PhD.