The EU is fighting back against Russian President Vladimir Putin's energy war with an emergency brake on natural gas prices to prevent excessive spikes. As Moscow threatens to further squeeze gas flows to Europe, the Commission yesterday proposed a cap level of 275 euros per megawatt-hour, to be activated only after a series of conditions are met. That’s well above current levels of about 120 euros, but below the highs the continent suffered in the summer. Now the work shifts to national governments, who've been divided over how to tackle the crisis and who'll have to sign off on the plan before it enters into force.

— Natalia Drozdiak and Ewa Krukowska

What's Happening

Oil Cap | Group of Seven nations are aiming to announce the level at which they will set a price cap on Russian crude oil today, we reported last week.  Allies had earlier discussed setting the cap somewhere between $40 and $60 per barrel, but sources said it could be above that. 

Rate Hike | The ECB must lift interest rates by at least a half point in December to tackle record inflation, according to Governing Council member Gediminas Simkus, who considers a larger move still an option. While it’s clear that price growth remains too rapid and borrowing costs will have to rise further in 2023, it’s too early to settle on the size of the next move, he said in an interview.

Chips Act | EU ambassadors may agree to a deal today on the bloc’s Chips Act. The nations' plan slightly increases the kinds of chips that qualify for state aid and places more limits on governments' emergency intervention in supply chains. The most contentious issue still on the table is the use of EU funds.

Bratislava Warned | Slovakia could face “financial and reputational consequences” if it doesn’t impose promised spending limits in its budget blueprint for 2023, the commission warned. It’s part of a mounting standoff between Brussels and Bratislava, which committed to the limits in return for recovery funds. A draft budget dropped them, which the commission said would be a “reversal of the milestone.” 

In Case You Missed It

Trade Spat | French Finance Minister Bruno Le Maire said President Joe Biden’s climate law shows the US has adopted an industrial policy that echoes a Chinese model of major subsidies to boost domestic production. The EU should look at all options to defend its own industry, he said, speaking at a news conference alongside German Economy Minister Robert Habeck.

Gas Savings | Large parts of German industry will no longer be able to avoid production cuts if companies need to further reduce natural gas consumption, according to a survey. So far, many businesses have managed to keep output steady while cutting back on gas use, but room for further savings is narrowing, according to a report by the Ifo Institute.

Russian Prank | Polish President Andrzej Duda admitted to being tricked by a prankster pretending to be French President Emmanuel Macron as he spoke with global leaders last week about a missile strike that killed two in a village near the border with Ukraine. The president’s office said Duda realized from “the unusual way” the conversation was taking place that it was probably a hoax and hung up. 

Wriggling Worms | Do you prefer wriggling worms or a psychedelic orgy? This is an actual question some people in Berlin have been asking themselves recently — not as the result of a bad acid trip, but following a legal spat over designs for seat covers on the city’s public transport system.

Chart of the Day

Seven European countries are set to see an annual contraction in output next year, according to new forecasts published by the OECD. By far the worst performance projected is for Russia, which officials at the Paris-based organization predict will see a 5.6% slump in gross domestic product after a 3.9% drop this year. In the euro area, Germany -- the bloc’s biggest economy -- and Finland are seen shrinking the most, with 0.3% declines.

Today's Agenda

All times CET

• 09:00 a.m. European Commission Vice-President Margaritis Schinas and Commissioner Ylva Johansson participate in debate in European Parliament on asylum and migration
• 12:00 p.m. European Parliament votes on resolution declaring Russia a state sponsor of terrorism
• 1:00 p.m. Energy Commissioner Kadri Simson participates in debate in European Parliament on energy prices
• Competition chief Margrethe Vestager speaks at the Digital Ireland Conference