According to the IMF, the worst-case scenario decision would send Europe into recession, swept up by the reliance on Germany and the eastern countries of Russia.
If Vladimir Putin decides to drastically, unexpectedly and unceremoniously close the Russian gas tap supplying Europe, the European economy would be doomed to a recession, i.e. a fall in Gross Domestic Product (GDP), by .6 percent off. points to growth as a result of this contingency. The Commission’s latest forecast precisely predicted that the EU would grow at 2.6% this year, an increase that would disappear completely if Russia decides to deal with the worst of the consequences.
That is the conclusion of the International Monetary Fund (IMF) in a report in which it also indicates what that impact would be in the case of Spain. Also, in the worst-case scenario – the most ‘unfavourable’, as the analysis describes it – the economy would have to subtract 2.6 percentage points from the estimate that GDP will grow slightly more than 4% in 2022. Spain would advance by half compared to the current calculation, although it would also fall into recession in 2023 as it would be swept up by all the European dynamism.
The report points to various scenarios, which in all cases presuppose a slowdown in European economic growth. The most favorable is a drop in GDP of three tenths for Spain and almost half a point for the European Union as a whole.
In any case, the focus of the report is on the countries of Central and, above all, Eastern Europe, which are most dependent on Russian gas supplies. The work shows that in some of these areas, such as Hungary, the Slovak Republic and the Czech Republic, “there is a risk of a shortage of up to 40% of gas consumption” and that their GDP is “by as much as 6%”. In this case, the worst-case scenario assumes a GDP decline of two and a half points, although the ‘drag effect’ would cause an economic earthquake across the EU.
Against this background, the IMF indicates that the effects can be mitigated “by ensuring alternative energy supplies and sources, reducing infrastructure bottlenecks and promoting energy savings”, while protecting vulnerable households and expanding solidarity agreements for shared gas between countries.
The global organization, whose general manager is Kristalina Georgieva, expects that if Russia suddenly cuts supplies, more imports would flow from other areas, such as liquefied natural gas (arriving via methane tankers) from Norway, North Africa or Turkey.
And it anticipates what several experts have pointed out in recent days: the West’s energy solidarity with the East. That is, from Spain or Italy to the rest of Europe. “It would be necessary to reverse some pipeline flows from west to east,” he says. He already warns of the possible bottlenecks that exist in the current pipelines between Spain and France, Italy and Central Europe, Central Europe and Southeastern Europe, as well as within Germany and Italy.
In addition, he expects “higher prices” if demand increases in the coming months, especially if the coming winter is much colder than usual. “Physical shortages could arise and the market could collapse in certain countries,” the document warns, which would require governments to act with “regulations” of consumption.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
