Europe Faces Energy-Induced Lehman Crisis... Windfall Tax Imposed on German Energy Companies

[Photo by EPA Yonhap News]

[Asia Economy Reporter Park Byung-hee] "All the elements that could trigger a Lehman Brothers crisis in the energy sector are in place."

Mika Lintila, Finland's Minister of Economic Affairs, described the current energy crisis facing Europe in this way. Lehman Brothers was a major U.S. investment bank that went bankrupt in September 2008, triggering the global financial crisis. Minister Lintila warned that Europe could face an energy crisis comparable to the 2008 global financial crisis.

On the 4th (local time), the Finnish government announced a loan and guarantee support plan worth 10 billion euros to prevent the bankruptcy of power companies. Prime Minister Sanna Marin explained that the measure is to protect companies essential for society to function.

After Russia's state-owned gas company Gazprom announced the complete shutdown of the Nord Stream 1 gas pipeline connected to Germany, European countries announced energy support measures one after another over the past weekend. The German government announced that it would invest 65 billion euros to support households and businesses struggling with soaring energy costs. The Swedish government also stated it would provide credit guarantees worth up to 23 billion euros to prevent power companies from going bankrupt.

Gazprom announced on the afternoon of the 2nd that it would completely stop the operation of Nord Stream 1, citing exposure found during regular maintenance. Initially, Gazprom planned to complete maintenance and resume gas supply by the morning of the 3rd. The reason Gazprom changed its stance before resuming supply is interpreted as a response to the G7 finance ministers' agreement to implement a price cap on Russian crude oil. Gazprom announced the complete shutdown of Nord Stream 1 immediately after the G7 finance ministers' agreement was announced on the 2nd. With Russia completely stopping gas supply, there are forecasts that European gas prices could hit new all-time highs again this week, prompting swift responses from European governments.

The German government announced it would impose a so-called windfall tax on energy companies that have made huge profits from rising oil and gas prices to secure funds for the 65 billion euro support. German Chancellor Olaf Scholz said in an interview with ZDF, "We will collect tens of billions of euros in taxes from energy companies that have made profits above a certain threshold to support ordinary people." He emphasized his confidence that Germany will not experience a large-scale blackout.

Under the new German government support plan, pension recipients will receive a lump sum payment of 300 euros starting December 1. Students and vocational trainees will also receive a one-time payment of 200 euros. Previously, the German government announced two rounds of household support measures, and including this 65 billion euro support plan, the total support amount from the German government now reaches 95 billion euros.

Swedish Prime Minister Magdalena Andersson also held a press conference in Stockholm on the 3rd, stating, "To help regional companies struggling with soaring collateral required for electricity trading, we will guarantee several hundred billion kronor by the close of the securities market on the 5th."

Earlier, the European Energy Exchange reported that the collateral companies must prepare for energy trading has surged, worsening liquidity and causing energy prices to become more unstable, urging governments to support trading entities buying and selling electricity. A Finnish state-owned energy company revealed last week that the collateral required to trade electricity in the Nordic power market surged by 1 billion euros to 5 billion euros.

This content was produced with the assistance of AI translation services.