Russian suspension of natural gas services to Poland and Bulgaria will not do direct damage to the European economy, but Europe can face a sharp growth slowdown if the boundary spreads to other countries – or if Europe imposes an embargo on Russian gas, economists said.
The Russian War against Ukraine has been rustling through Europe, attacking energy prices and injuring producers right when the blocks recovered from the recession induced by Pandemic. Last week’s international monetary funds cut the estimated growth of 2022 for countries that used Euro to 2.8%, from the estimated 3.9% in January, with Germany, the largest economy, received a big blow.Euro fell on Wednesday below $ 1.06 for the first time in five years due to increased concerns about energy security and slowing European growth. The currency has declined almost 4% of the US dollar in April alone.
This week’s action by Gazprom, Russian oil monopoly, to kill gas tap to the two European Union countries it is impossible to immediately give Europe to a new recession. This is partly because Europe “still has many diplomatic and fiscal policy responses available” to fight one, said Mark Haefele, head of investment in UBS, in a note to the client.But the scourge of direct energy warfare – including the potential of European embargoes in Russian gas and oil – towering at vulnerable times. European companies have faced higher energy costs, which threaten profit margins and squeezed consumer purchasing power, analysts
The European Union has drawn plans for Russian oil embargoes but did not mention it within a few hours after Gazprom’s cutoff. Europe applied a ban on Russian coal this month. And while Germany in particular has rejected an embargo on Russian oil or gas because of extraordinary costs to its industry, new officials are reconsidered.”This is a thin veiled threat to Germany. Berlin is currently weighing how far and the European Union can direct Russian energy exports, and Russian threats are directed to change their calculus, “said Jonathan Hackenbroich, a policy partner on the European council about foreign relations.
However, the full gas cutoff for Germany “will have a terrible consequence for the German and European economy,” he added. “The factory must curb production or even close. Some main industries can be lost forever, and actually it is difficult to assess various consequences. But Russia is also very dependent on the income of energy exports, because they represent their last big lifeline. “Embargo about Russian energy is likely to trigger European recession, and high inflation” will become a higher inflation, “said Carsten Brzeski, Head of Global Research at EG Bank.”All of this is clearly negative for short -term views,” he said. “But to worsen, high energy and commodity prices and disturbed supply chains will all endanger Europe’s international competitiveness at risk.”
Five leading economic research institutions in Germany said this month that the full energy embargo, was one that had to be applied immediately, would reduce the annual economic growth in the European Union this year and the next cumulative 3%, while increasing inflation with about 1 point percentage of percentage in The two years.
That’s because natural gas may have to be rationed at the beginning of next year, and the European industry sections “then must be turned off for four months to allow households to still heat their homes during winter,” said Holger Schmieding, head of economist at Bernerg Bank.
He said that “at least possible” that the allotment can be started even earlier in the event of a direct Russian gas cutoff.”My best suspicion remains that damage to European growth will be very serious,” Schmieding said. “Is that going to be a price worth paying to limit Russia’s ability to maintain a long war in the end is a political assessment that is far beyond the mere economy