Economists warn that next winter will be even more challenging for the eurozone economy.
- The euro zone economy will contract this year due to high inflation and potential energy shortages. (Getty Images)
Europe is trying to crack down on dwindling fuel supplies from Russia, caused by Western countries’ tough anti-Russia sanctions imposed after the start of the war in Ukraine in late February.
The Financial Times quoted economists warning that the euro zone economy will contract this year due to high inflation and potential energy shortages.
According to the economists, the currency area is already in recession, and gross domestic product will shrink over the next year.
Chiara Zangarelli, an economist at Morgan Stanley, pointed out that “gas markets in Europe remain a key risk” and warned that “additional supply disruptions or a particularly cold winter could lead to renewed tensions and renewed rising prices, prompting another round of adjustment enforce and demand destruction.”
Although EU members have managed to reduce their dependence on Russian gas imports by turning to the United States and Norway and switching to alternative energy sources, economists have warned that without Russian supplies, Europe’s gas storage facilities will be much more difficult to manage in the future to replenish next winter.
For his part, Carsten Brzeski, head of macro research at ING Bank, warned that “the level of gas storage is now falling rapidly”, adding that “there is still a risk of an energy supply crisis this winter”.
“Next winter will be even more challenging,” said Brzeski.
This comes just weeks after Bloomberg reported that amid the aftermath of the war in Ukraine, Europe was “hit about $1 trillion by rising energy costs” and warned that “the deepest crisis in decades is just beginning”.
Shortly after the start of the war in Ukraine, the West imposed a package of tough sanctions on Russia. In December, the EU also joined the G7 to cap Russian oil prices at $60 a barrel and introduced its ninth package of sanctions against Russia.
The restrictions disrupted supply chains worldwide and exacerbated ongoing problems in the energy market, which in turn led to rising oil prices.
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