EU gets another reason for a gas cap U-turn

BRUSSELS, Dec 9 (Reuters Breakingviews) - The European Commission’s gas cap has taken some withering friendly fire. The European Central Bank has slammed the proposal for threatening financial stability and putting the central bank in an untenable position, in an opinion published on Thursday. The ECB frets that the cap could increase price volatility, discourage the use of central counterparties for derivatives clearing, and worsen the effects of margin calls.

The gas cap, put forward under intense political pressure, has exposed divisions among European Union member states. As designed, it would kick in if the front-month contract on the Dutch Title Transfer Facility exceeds 275 euros per megawatt hour for two weeks. A hardline group of countries including Germany and the Netherlands says any move to lower that amount is unacceptable, while other countries like Belgium and Poland say lower levels are essential for the cap ever to be used. The TTF contract for delivery in early January was hovering at only 135 euros as of Friday morning .

Instead of crafting a workable compromise, the Commission plan seems to have achieved the impressive feat of being both unusable and a danger to financial stability. But if it stays on the agenda, it threatens to hold up a broader energy crisis response package. Ahead of next week’s European leaders’ summit, the smart move is to scrap it. (By Rebecca Christie)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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