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Prime Minister Draghi’s press conference in Versailles

Friday, 11 March 2022

[The following video is available in Italian only]

INTRODUCTION BY PRIME MINISTER MARIO DRAGHI

This informal meeting of the European Council was a real success. I have rarely seen the European Union so united, especially during yesterday’s discussions. Out of the many European Council meetings I have attended, I don’t think I can recall such a strong spirit of solidarity as I saw here, on all of the issues that were covered. We discussed the issues that were on the agenda: energy, defence, the macroeconomic situation.

With regard to energy, if I had to sum up what I said and the discussion, the response to the energy situation is based on four pillars. The first is diversification, in two senses: first and foremost, diversification in terms of gas suppliers other than Russia. We have already begun to work on this, we are making good progress and I must also thank Minister Di Maio for this. Italy is already taking steps in this direction. Diversification also means replacing fossil fuels with renewable sources. As I also said in Parliament, this is the only path to pursue over the long term; however, we must do much more now, given the current situation, to visibly increase investments in this area. Yesterday’s Council of Ministers meeting passed resolutions regarding six wind farms. Things are therefore moving, but the authorisation process remains very slow both at EU level and in Italy. In this regard, the European Commission has promised that it will help Members States in any way possible.

The second pillar regards introducing a cap on gas prices. This is a very complex issue, and I believe it can have some important effects. In fact, since this began to be discussed – and this is perhaps a coincidence - the price of gas has fallen significantly, from over EUR 200 to around EUR 116 today. There are various opinions on this; many supported the opportunity of this measure. The European Commission, I believe at the next European Council meeting, will present a more general report on how to reduce the effects of gas on the rest of the electricity supply.

The third pillar, partly connected to the second, is how to separate the market of electricity produced by renewable sources from the gas market. Today, there is only one price, meaning that also electricity produced at a very low cost indeed – such as the electricity produced by many renewable sources – arrives to consumers at the same price as electricity produced with gas. This is the main cause of bill increases. 

The fourth pillar refers to taxing the extra profits made by electricity providers, and it is very important that the European Commission acknowledged this in its communication a few days ago. The Commission estimates that taxing the extra profits of electricity providers could generate revenues of approximately EUR 200 billion. This is therefore a source that certainly needs to be looked at very closely. I have been saying this for a long time, but there is now also the European Commission’s positive opinion and, from what I’ve heard, many Member States are thinking of moving in this direction. 

Discussing shortages in the energy sector, we also went on to speak about possible shortages of other raw materials, including in the agri-food industry. In this regard, one natural response is that, should this situation persist or worsen, it will be necessary to import from other countries, such as the United States, Canada and Argentina. 

What does all this lead to (and we will also see this on other occasions)? It leads to the need to review the entire regulatory framework, which is justified by this emergency situation. This is the case for the Stability Pact, for the laws regarding State aid, for the standards of food products that may need to be imported, for the electricity market. In short, the Commission now has the firm belief that it is necessary to temporarily re-examine the rules that have accompanied us over the last years. 

With regard to defence, there was a brief but interesting discussion. Josep Borrell cited an interesting figure: the European Union spends three times more on defence than Russia does. I was frankly surprised by this figure; I thought it was much less. What we now need to achieve is much better coordination than what we have today. To give you an idea, another figure that was mentioned was that we have 147/146 defence systems, while the United States has 34. Participation in invitations to tender, production, joint projects, the issuing of licences, coordination of troops on the ground: we have decided to move forward together in all these areas.

There was an interesting discussion on the macroeconomic situation. This is clearly a time of great uncertainty; it cannot be said that the economy is performing badly because Europe is continuing to grow. At the same time, however, this uncertainty causes concern for the future and therefore dictates the economic policy agenda for the coming months. In this regard, it is necessary to bear something in mind: in order to meet its objectives in terms of climate, defence and energy policy, the European Union has very large financing needs. According to the Commission’s calculations, and assuming that the shortage we wish to fill regarding the defence budget is 0.6 per cent of the European Union’s GDP, which is what separates us from the level decided in NATO, between EUR 1.5 and 2-plus trillion in funding is needed over the next 5-6 years. This is to meet the 2030 climate objectives and to fulfil the promises that we signed within NATO. National budgets obviously cannot cover this, and I raised this issue very clearly. We must therefore find a compromise on how to generate these resources, on where to find these resources. National budgets clearly do not have this scope. Discussions will continue also on this point. This informal meeting of the European Council was also a success because it has prepared a very good basis for discussions at the next formal meeting. This is one of the matters we will be discussing during the formal meeting in Brussels in a few days’ time. 

I wish to conclude by returning to the point that we need a budgetary policy response. Should the economy weaken due to these shortages of raw materials, due to these sanctions, due to the general reduction in exports, due to the possibility of this uncertainty spreading to the global market, to global trade, due to financial markets being somewhat shaken, then it is clear that a convincing budgetary policy response will be necessary and - and I shall say this again – this cannot really come from national budgets. We have already spent EUR 16 billion to mitigate the effect of price rises, so the response needs to be at EU level.

[Courtesy translation]