Economics: Europe’s energy crisis intensifies

Electricity and gas prices have skyrocketed

Europe’s energy crisis has intensified considerably over the past few weeks, with geopolitical, weather-related, and technical issues combining to send spot electricity and gas prices to 14-15 times their pre-pandemic average.

 

Forecast revisions are coming – inflation higher, GDP growth lower

The implications for the European economy are not surprising. Inflation is likely to remain elevated for longer than expected. And with prices now reaching unsustainable levels, an outright decline in output seems inevitable.

 

Policymakers appear to have limited options available 

Worryingly, policy options are limited. Ramping up energy efficiency or supply to the degree necessary seems unlikely before the winter heating season begins. And cushioning the private sector is not without complication.