a “painful trade-off between the bankruptcy of some and the bill of others”

In London, October 10, 2021.

Losses & profits. All politicians, as long as they have been in power, will tell you: their job often boils down to arbitrating between two bad solutions. Like Chimene in The Cid, in a hurry to choose between her father and her lover, the ministers must lean towards public finances or the economy, social or ecology, the consumer or industry. While knowing that the result, which will not satisfy anyone, will be an opportunity to make new enemies. The energy situation in the United Kingdom, where gas prices have increased six-fold in a few months, is conducive to this kind of difficult dilemma. Thus, the Minister of Energy and Business, Kwasi Kwarteng, is at daggers drawn with his counterpart in the economy, Rishi Sunak, on the situation of businesses in the country.

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Without being able to pass on energy prices to customers, electricity producers are going bankrupt one after the other. There are now a dozen victims, and the next may well be a company backed by oil giant BP. For the moment, the minister excludes any aid, saying that the state was not there to support poorly managed companies, and that it was out of the question to lift the ceiling on price increases for the consumer. But his discourse was tempered in the face of powerful industries which consume a lot of energy, such as chemicals, iron and steel, paper and glass factories. They too are threatening to close their factories. So he promises help that his colleague Chancellor of the Exchequer does not want to hear about.

The temptation of debt

Classic quarrels in times of crisis, of which French ministers are also customary. But the situation in France is less dramatic, the country depends little on gas. This type of painful trade-off between the bankruptcy of some and the bill of others has not yet arisen. The government has just frozen gas prices and increased the energy check for low-income households. But the continued rise in electricity prices could well jeopardize both the economic recovery and the purchasing power of the French. The temptation, in Paris more than in London, will be to tap into the very deep pool of debt. But this is already in great demand by stimulus investments.

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Optimists will see in this circumstance a salutary shock pushing to strengthen energy savings, the safest source to meet the climate challenge. A bit like the health crisis has dramatically accelerated the digital transition. The pessimists will answer that it will be at the cost of an unprecedented social crisis. In the absence of a perfect martingale, it will be necessary to resolve to the choice of Chimene.

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