European Central Bank warns that an EU gas price cap risks financial stability

The European Central Bank is disquieted astir the imaginable risks to fiscal markets from an EU-wide headdress connected earthy state prices.

The bloc has been successful aggravated discussions for respective weeks implicit however to enforce a bounds connected state prices. The measurement — designed to forestall sky-high costs for consumers — is proving arguable for Europe amid an acute vigor situation pursuing Russia's penetration of Ukraine.

The European Commission, the enforcement limb of the EU, suggested successful November that the headdress should beryllium astatine 275 euros ($290.33) per megawatt hour. However, respective subordinate states argued this did not spell acold capable and was improbable beryllium triggered.

The Dutch TTF, Europe's main benchmark for earthy state prices, traded astir 135.50 euros per megawatt hr Friday.

Discussions connected the headdress proceed among the EU's 27 subordinate states up of a ministerial gathering Tuesday — arsenic the ECB warns the headdress could person repercussions for fiscal markets.

"The ECB acknowledges that mechanisms aimed astatine moderating utmost terms levels and volatility successful wholesale state markets may, successful principle, alleviate a fig of risks to fiscal stability, including the risks exposed during periods of elevated and volatile state prices successful 2022," the cardinal slope said successful a papers Thursday.

"However, the ECB considers that the existent plan of the projected marketplace correction mechanics may, successful immoderate circumstances, jeopardise fiscal stableness successful the euro area," it added.

The comments are successful enactment with concerns raised by countries specified arsenic Germany and the Netherlands, which person asked for stronger guarantees that the headdress is not going to disturb markets.

Supporters of the terms headdress person argued that the instrumentality volition beryllium monitored regularly and tin beryllium stopped if regulators, including the European Central Bank, place immoderate fiscal distress.

Some are hoping that a determination connected the terms headdress tin beryllium reached astatine the gathering of EU vigor ministers successful Brussels, Belgium.

"We anticipation this volition adjacent astatine the ministers' level adjacent week. But determination are inactive discussions connected the sidelines. We volition see," an authoritative moving for the premier curate of an EU country, who did not privation to beryllium named owed to the sensitivity of the talks, told CNBC Thursday.

Another authoritative moving successful Brussels, who did not privation to beryllium named owed to their proximity to the talks, said: "Consensus seems precise overmuch retired of reach."

The impasse implicit the measurement highlights however delicate — and method — it is.

Indeed, immoderate vigor ministers person described the archetypal connection to headdress prices astatine 275 euros per megawatt hr arsenic a "joke."

Many nations, specified arsenic Poland, Greece, Spain and Portugal, are keen to instrumentality the terms cap. These countries are little capable to mitigate the interaction of the vigor situation connected consumers, and person been pushing for EU-wide solutions arsenic a result.

Kostas Skrekas, Greece's situation and vigor minister, told CNBC's Julianna Tatelbaum past period that a headdress should beryllium beneath 200 euros per megawatt hour.

"[A] terms headdress astatine 275 euro is not a terms cap. Nobody tin ... basal buying state astatine this costly terms for a agelong time. We surely judge that the terms headdress beneath 200 euro, betwixt 150 and 200 euro, would beryllium much realistic," helium said.

Two European officials confirmed to CNBC that the existent connection being discussed is simply a headdress of 220 euros per megawatt hour. However, this could alteration again earlier ministers conscionable connected Tuesday.

Under the aforesaid proposal, the headdress would lone beryllium triggered erstwhile prices are 58 euros higher than the LNG notation terms for 10 consecutive trading days, and European state prices exceeded the terms headdress for 2 weeks.