Olaf Scholz backs proposal for new European gas pipeline

Germany’s chancellor, Olaf Scholz, said he backed the idea of a new gas pipeline linking Portugal and Spain to central Europe via France, saying it would vastly improve Europe’s energy security.

Speaking on Thursday at his first summer press conference, Scholz said he had discussed the idea with the leaders of Spain, Portugal and France and the European Commission’s president, Ursula von der Leyen.

“I made the case that we should really tackle such a project,” he said, adding that there would also be “other connections between north Africa and Europe that will help us to diversify our [energy] supply”.

He did not specify the project to which he was referring but Spain and Portugal have been pressing France to revive a planned gas pipeline across the eastern Pyrenees, which was shelved in 2019 after resistance from Paris. Madrid wants the European Commission to fund the project. 

The lack of alternative pipelines has been identified by the EU as a big obstacle in its efforts to wean the continent off Russian gas. Brussels has made knitting together the bloc’s energy infrastructure, eliminating bottlenecks and ending delays to pipeline projects a priority.

But such a project will not come soon enough for Germany. Berlin is racing to find alternative sources of gas after Russia drastically reduced flows through Nord Stream 1, the pipeline under the Baltic Sea that is the main conduit for Russian gas into Europe. NS1 is currently operating at only 20 per cent of its capacity.

The dearth of gas has pushed up prices and complicated Germany’s efforts to fill its gas storage ahead of the winter heating season. Industry fears the government might be forced to declare a gas emergency, which would mean supplies would have to be rationed.

Germans are bracing for rocketing heating bills this winter, amid a flatlining economy, soaring inflation and supply chain problems that continue to dog the industrial sector. The latest problem: sinking water levels on the Rhine, which are playing havoc with critical river commerce.

Scholz acknowledged Germany was living through “serious times”, but said the government would “do everything it can to ensure people get through this difficult period”, repeating his mantra: “You’ll never walk alone.”

He said he was working on a third package of financial assistance for hard-pressed citizens, and described a proposal unveiled this week by finance minister Christian Lindner to tweak tax brackets to account for higher inflation as “very, very helpful”. Lindner said the idea would result in tax relief for 48mn people.

Scholz said even with the new financial aid package, Germany would be able to adhere to its constitutional “debt brake” from next year, as planned. The brake places a strict limit on new borrowing by the federal government.

Asked by reporters if he feared rising social tensions this winter, as the gas crunch gets worse and energy costs continue to rise, he replied: “No, I don’t think there will be unrest in this country. Because Germany is a welfare state.”

Scholz said he was confident Germany would be able to fill the shortfall in gas supplies from Russia, with new import terminals for liquefied natural gas currently being constructed on the North Sea coast due to begin operations early next year.

“We’ll be in a situation . . . where it might be expensive to get gas, because of the state of the global market, but we will always get enough,” he added.

Scholz was also asked repeatedly about the “cum-ex” tax fraud scheme, the subject of a sprawling inquiry by law enforcement authorities in Germany.

In 2016, when he was mayor of Hamburg, the tax authority there chose not to demand repayment of €47mn in back taxes from a private bank, M.M. Warburg, which had been involved in some of the cum-ex trades. The opposition accuses him of influencing the tax authority into letting the bill lapse — a charge he denies.

Scholz said there was “no evidence whatsoever of political influence [being exerted] over this decision”.

His alleged role in the cum-ex saga re-emerged in the past few days after it was revealed authorities had discovered about €200,000 in cash in a safe- deposit box belonging to a former Hamburg MP from Scholz’s Social Democrats, Johannes Kahrs.

Asked by reporters what he knew about the money, Scholz said “nothing”. “I’m just as curious as you and would love to know where it comes from,” he said. “But he [Kahrs] won’t tell you or me.”