Can Europe keep the lights on?

The extraordinary rise in European gas prices in recent weeks has raised the possibility that, as a last resort, European governments may need to ration the supply of electricity to businesses or households. The economic impact of rationing would depend on how deep and long the cuts were, but under plausible assumptions, a few months of power reductions could easily wipe 0.5% off quarterly euro-zone GDP.
David Oxley Senior Europe Economist
Continue reading

More from Europe

European Economics Weekly

Rising Covid fears will keep policymakers dovish

It is too early to judge how serious the B.1.1.529 variant will turn out to be, but it certainly reinforces the case for central banks to be ultra-cautious when withdrawing their policy support. We now think that at its next meeting, the ECB will make clear that even if it intends to end net PEPP purchases in March, it stands ready to start them again if needed. That in turn should help to keep bond yields and spreads low. Meanwhile, we are braced for some “shock” inflation numbers next week, but they should mark the peak and inflation is likely to fall quite sharply next year.

26 November 2021

European Economics Update

PEPP not guaranteed to end in March

The account of October’s ECB meeting suggests that it is by no means guaranteed that net PEPP purchases will end in March. And even if they do, the Bank may well leave open the possibility of re-starting PEPP purchases later in 2022 if needed. Meanwhile, we agree with the ECB’s message that investors have got ahead of themselves by pricing in interest rates hikes for next year.

25 November 2021

European Data Response

German Ifo Survey (November)

The fall in the Ifo Business Climate Index (BCI) for November was in line with expectations and suggests that the German economy was struggling even before the recent tightening of Covid restrictions. Things will be much worse in December as coronavirus restrictions are tightened further.

24 November 2021

More from David Oxley

Nordic & Swiss Economics Update

What to make of Sweden’s August GDP shocker?

The eye-watering decline in Swedish GDP in August suggests that supply shortages and weakening global growth will continue to take the shine off the impressive rebound in the Swedish economy in late 2021.

6 October 2021

Nordic & Swiss Data Response

Switzerland CPI (Sep.)

Inflation is a rare beast in Switzerland at the best of times and the lower-than-expected September print means that we now doubt it will even breach 1% this year. Against this backdrop, the stage is set for many more years of inaction at the SNB.

4 October 2021

Nordic & Swiss Economics Weekly

Opinions at Riksbank slowly starting to shift our way

The minutes from the Riksbank’s last meeting, which were released this week, indicate that half of the six Executive Board members think the time is approaching to dial the dovishness back a touch. While we think that the repo rate will most likely be left on hold at zero throughout our forecast horizon, the stars are starting to align behind our view that policymakers will start to allow the balance sheet to contract next year.

1 October 2021
↑ Back to top