While Europe’s energy crisis is expected to continue not only into the winter of 2022 but also into 2023 and beyond, experts predict that the European Union, where energy ministers will meet urgently on 9 September, will experience a recession based on on natural gas in 2023. German investment bank Berenberg expects Eurozone GDP to contract 1.5% in 2023 and raise its inflation expectations from 5% to 6.1%. According to the Financial Times news report, Berenberg chief economist Holger Schmieding “Rises in natural gas prices are dealing a new blow to European economies. “Rising prices for consumers and businesses will aggravate the recession and worsen the outlook for inflation.”
“It will be difficult to go back to the pre-pandemic”
Andrew Kenningham, chief economist at Capital Economics Europe, warned that the impact of natural gas prices, which have increased 14 times since 2020, on growth will be “long-term”. Kenninghem says “Europe may permanently lose its competitive edge, especially in sectors such as metals and chemicals, and it will be difficult for it to return to its pre-pandemic growth trend.”
“The energy crisis could continue for several winters”
The CEO of Shell Plc, one of the largest European energy companies, predicts that the energy crisis in Europe could continue “not only this winter, but also the coming winters”. CEO Ben Van Beurden, at a press conference in Norway, said: “While there is a crisis that could continue for more than a winter and the construction of alternative canal infrastructure continues, we may need to save efficiently. cut from the industry and direct it to families. ”Claiming it would be” fantasy “to say this would be an easy task, Van Beurden said,” We have to face reality. “Chief Executive Van Beurden also said last month that the energy market will likely remain tight, there will be supply-side constraints and that prices will remain volatile not only this year but also next year. Tesla CEO Elon Musk also shared the view that oil and natural gas should be used in the short term for green transformation and said: “Otherwise, civilization will collapse.”
TTF goes down with interventions and titles, it goes up again due to concerns
EU countries could take a decision on applying a maximum price to the electricity market at the summit where energy ministers will meet urgently on 9 September. On the other hand, concerns that the Russian gas monopoly Gazprom will not increase flows to Europe again have raised the price of the TTF, which fell to 242 Euro / MWh in Wednesday’s transactions, back to 284 Euro / MWh. . The possibility of intervention and the occupation of the gas tanks of EU members have been effective in decreasing.
“The recession is certain, the question is how long and heavy it will be”
The latest aggressive messages from the US Federal Reserve (Fed) and the European Central Bank (ECB) further worry global investors, who expect a dovish U-turn from the centers amid recession clouds. The steady reduction in dollar and euro liquidity to fight inflation is seen by many experts as a growing economic pain on both sides of the Atlantic. Pictet Wealth Management analysts expressed the following assessment for the Eurozone in a client note on Tuesday: “One thing is clear: a recession in Europe seems inevitable. The only question is how long it will take and how heavy it will be ”.
The gas crisis also hampers parity
With restrictive messages from the ECB, the markets expectation of a rate hike of 75 bps strengthened (50% probability) and the pair tested above 1 again on Tuesday, but the outlook for the euro is not very bright. due to the energy crisis. Concerns that Nord Stream 1 will be closed completely today and will not resume operations on Sept. 2 as expected continue to hinder the pair. Saxo Bank Forex Strategist John Hardy explains the near-term rises in parity with the words “The ECB’s messages have been priced much more aggressively in recent sessions and the decline in natural gas prices is somewhat effective.” UniCredit analysts, on the other hand, pointed out that before the inflation data in Germany, which stood at 7.9 per cent, above expectations, “the increase in natural gas prices has not yet seen a peak. of inflation “. The European Commission’s Economic Prospects Indicator data for August also worsened above expectations and dropped to 97.6. The industry confidence index fell from 3.4 to 1.2 in August (1.5 expected), while consumer confidence is at an all-time low at -24.9. The harmonized CPI for Germany went from 8.5% in July to 8.8% in August. After the data, the pair was trading 1.00 at 15:52 CEST. The dollar index has not strayed far from its 20-year high and has risen more than 13% since the start of the year, reaching 109,478 in the past few days. At 3:53 PM CET, the index is at 108.66. The yield on US 2-year bonds reached the 3,437 percent level, surpassing the level of 2007.
“There will be a ‘whopper’ recession in 2023, the Fed is to blame!”
Recession forecasts are also on the rise in the United States, which is not dependent on Russian gas and oil. Finally, famed Johns Hopkins University economics professor Steve Hanke predicted that the US economy would go into recession in 2023 and pointed out that the Fed itself was the culprit. last few months and this will likely result in an economic slowdown, Hanke said: “We will have a recession of enormous size in 2023. We will see a period of stagflation and why inflation is high – and will continue to be high in 2023 and even in 2024 – it’s the Fed’s unprecedented monetary expansion. (Fed Chairman Jerome Powell) What he doesn’t understand is that even at this point he doesn’t understand what causes inflation. He’s still talking about supply problems. ” he says he. Recalling that excessive monetary expansion always results in prolonged inflation, Hanke also draws attention to the fact that the Fed, whose balance sheet approaches $ 9 trillion, went to an expansion early in COVID. Without precedents.