Preventing energy crisis spreading to financial sector is ‘high priority’, says Vestager

European Commission executive vice-president seeks renewed momentum on tax reform and warns Big Tech further conflict looms

The crisis in the energy industry must be prevented from spreading into the financial sector, the European Union’s competition and digital chief has warned as the bloc prepares a large-scale intervention to curb soaring costs.

European Commission executive vice-president Margrethe Vestager spoke ahead of a trip to Dublin for meetings with the Government on the rollout of new EU legislation to rein in the tech sector, and the invasion of Ukraine and the energy crisis it has provoked.

“What we’re doing right now is of course to do what we can to prevent what is bothering energy companies trickle over to the financial sector,” she told The Irish Times. “It’s high priority to prevent that this crisis spreads, because it’s difficult enough as it is already.”

The EU is preparing to ease collateral rules to help energy companies that have been hit with demands for vast cash reserves to meet margin calls that have risen steeply as energy prices spiked.


The crisis forced Finland and Sweden this month to offer billions of euro in liquidity guarantees to companies to avoid what Helsinki described as a potential “Lehman Brothers” moment in the energy industry, in reference to the bank collapse that precipitated the global financial crisis in 2008.

“For quite a number of [energy companies], there is a need for guarantees, because prices are volatile and you don’t know at what prices you can sell what you buy now as inputs,” Ms Vestager said.

UK contagion

The commissioner said that, so far, no contagion effect had been noted by the EU from the situation in Britain, where sterling has plunged and the Bank of England has been forced to intervene to mass purchase gilts to prevent a collapse in pension funds.

“I think the UK situation is quite specific to the UK. So far we have seen no effects on that,” Ms Vestager said.

She conceded that momentum towards a planned minimum 15 per cent corporation tax for multinational companies is at risk of flagging, as opposition by Hungary holds up agreement in the EU and other matters distract leaders’ attention.

It “takes an effort” to follow through on the taxation reform and climate change plans “because of the number of crises that we have to deal with”, Ms Vestager explained.

She hailed “progress” from the US in passing part of the plan in President Joe Biden’s recent Inflation Reduction Act. But she warned it was essential to also pass a reform to make profits taxable where they are made, and to make the 15 per cent minimum an “effective” taxation rate.

“The key word here obviously is ‘effective’, because you can have taxation at all levels and what I have seen in my work [is] that sometimes that is absolutely fictional, compared to the taxes actually paid,” she said.

“You’re only approaching tax justice if you also have the redistribution of taxable income from the largest companies to the different jurisdictions where they make their profits, and that is still in the making.”

Tech monopolies

Ms Vestager comes to Dublin on the back of implementing two major EU legislative reforms of the tech industry: the Digital Markets Act, which seeks to prevent monopolies in tech; and the Digital Services Act, which aims to make whatever is illegal offline illegal online.

During the negotiations “some member states were not quite happy with the Irish enforcement” on tech companies, Ms Vestager said, which led to an agreement that the commission would have enforcement responsibility for the largest online platforms under the Digital Service Act.

As EU chief of antitrust enforcement, Ms Vestager has speared a series of landmark investigations and antitrust cases against major tech firms including Google and Apple. She expects more to come.

“We will keep chasing behaviour that is not legal,” Ms Vestager said.

Currently in the crosshairs are “collusion” between companies to shut out other competitors, and the practice of “tying”, whereby a tech company with a dominance in one area of the market “ties” other products to their dominant service to force customers to use it.

The new Digital Markets Act grants the commission the power to ultimately break up tech monopolies to enforce fair competition – and Ms Vestager says she is willing to do it. “We have the tools also to break up companies if that is the only solution available,” she said.

“Of course, it is very far-reaching from an authority to order a company to divest part of the company. So it will have to be in extreme cases. But the tool is there in the toolbox, and it remains to be seen if we get into a situation where we’ll have to use it.”

Naomi O’Leary

Naomi O'Leary

Naomi O’Leary is Europe Correspondent of The Irish Times