Europe is winning the energy war, only to face recession

By Lionel Laurent

07 Mar 2023 · 3 min read

informed Summary


One year on from the Ukraine invasion, Europe has avoided the worst-case scenario of a brutal energy-driven slump. The price of natural gas is back down to prewar levels, factory output is growing again and leaders like Ursula von der Leyen are declaring victory in unity against Vladimir Putin, who has "lost the energy war he started."

It now runs the risk of having dodged one recession only to face another, self-inflicted one: interest-rate increases from jittery central bankers. Euro-zone "core" inflation, excluding energy and food, hit an all-time high of 5.6% in February and the European Central Bank looks set to raise rates to a record 4% to match. The fear is that without this further tightening of monetary policy, a new vicious cycle of price hikes will get underway, driven by wages.

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