Europe remains structurally vulnerable to external events capable of severely disrupting supply chains, said the prime minister, Luc Frieden, on Thursday 21 May, on the EY stage at the Cercle Cité. “We are facing exactly the same situation with the closure of the Strait of Hormuz,” he explained, in response to questions from the accounting firm’s country manager, Alban Aubrée. “If you look at oil imports from the Middle East to Europe, they still account for a huge share. This has a considerable impact on us. Prices will rise. We risk a supply shock if this strait is not reopened quickly.”

The prime minister went even further by setting a kind of implicit deadline. “I honestly believe that a major economic shock – not just an energy crisis – will occur if, over the next two weeks, this strait remains blocked because we will face shortages.” His reasoning is based on a simple observation: despite all the talk of the energy transition, the European economy remains dependent on international energy flows and therefore on certain strategic chokepoints, such as the Strait of Hormuz.

“Let’s do more together”

In his speech, Luc Frieden drew a direct parallel between the war in Ukraine and the disruption to Russian gas supplies. In his view, Europe is gradually realising just how much certain regional conflicts can have an immediate impact on living standards, industrial costs and even European public finances.

The real challenge may still lie ahead.

Luc Frieden, prime minister

This outlook also explains the fiscal prudence advocated by the Luxembourg government. The Prime minister acknowledges that, so far, he has refrained from rushing to announce massive support packages for households or businesses. “The real difficulty may still lie ahead,” he essentially sums up. In his view, using up all budgetary leeway immediately could deprive the state of the means to act if the energy situation does indeed deteriorate in the coming weeks.

Looking beyond the immediate crisis, Luc Frieden advocated a structural response: greater European integration. In his view, Luxembourg remains reliant on imports for a significant proportion of its energy. However, he believes that the European Union can reduce its vulnerability through more electricity interconnections, increased renewable energy production and a more coordinated energy policy. “We must become more European,” he insisted. “Let’s do more together so that we are less dependent on fossil fuels from the Middle East or elsewhere.” This final remark serves as a reminder that he is not so much adding fuel to the fire of relations with the trade unions, but rather greasing the wheels of negotiations that must succeed given the current context.