Prices of energy

Europe’s winter energy crunch

Europe is facing a looming energy supply crunch this winter. Our infographic shows how energy shortages, high prices and an ensuing economic downturn will affect countries across the region. Analysing recent data and developments, our analysts have made a qualitative assessment of each country’s exposure to the direct and indirect impact of a sustained cut-off in Russian gas, which is now our baseline forecast. The first map shows the rated countries’ exposure to the direct impact of a sustained gas cut-off according to their reliance on Russian gas, the percentage of gas in their overall energy mix and their ability to secure alternative supplies. The second map shows the assessed countries’ vulnerability to the secondary effects of a severe gas shortage, including their exposure to record-high energy prices and to a sharp downturn in economic output in Germany.

We now forecast that the EU will enter a deep recession as a result of energy shortages and sustained elevated inflation. The impact of the crisis will be uneven owing to countries’ differing levels of exposure, but all countries will be adversely affected to some degree. The EU has yet to agree on a detailed and actionable contingency plan beyond its recent recommendation of an EU-wide 15% reduction in energy demand, which proved to be contentious. Reaching agreement on an energy-sharing mechanism will be challenging, as countries compete to secure alternative supplies. 

Countries in central Europe, including Austria and Germany, and several east European states, which are highly dependent on Russian gas and have limited alternative supply options, will be the worst affected by the energy crunch. They are likely to experience a hit to economic output of 2‑3 percentage points in 2022‑24, with the main impact being felt in 2023. Germany has reduced its use of Russian gas to about 35% (from about 55%) but remains among the most exposed countries owing to its large industrial sector and lack of liquefied natural gas (LNG) infrastructure. Landlocked central European countries will experience a triple shock from energy shortages, high inflation and spillover effects from the recession in Germany. The ability of other countries to weather the crisis will depend on their energy mix, industrial structure, energy regulation, government’s emergency response and European solidarity.

The analysis featured in this article can be found in EIU Viewpoint, our new country analysis solution. EIU Viewpoint provides unmatched global insights covering the political and economic outlook for nearly 200 countries.