Giving up Russian gas would weigh heavily on Europe’s economy, says an IMF official

Europe can go without Russian gas for the next six months, but beyond that the economic impact would be severe, stresses Alfred Kammer, the IMF’s Europe director, who recommends a number of alternative measures, such as: B. Reducing consumption to build up inventories.

“Europe can live with a total shutdown in the next six months,” said the German head of the International Monetary Fund in an interview with AFP on the sidelines of the spring conference in Washington.

In the summer, the demand is lower and European countries could also fall back on their stocks. However, reducing inventories to critical levels would put strong upward pressure on prices, which are already at record highs, the official warned.

“On the other hand, an interruption until winter or even longer would have a significant (negative) impact” on the European economy, Kammer continued, pointing to the risk of cuts during the winter.

Russia is Europe’s largest natural gas supplier.

Cutting off gas imports in retaliation for Russia’s invasion of Ukraine is one of the options being discussed in Western countries to pressure Moscow to cease hostilities. But Russia itself could decide to turn off the tap, jeopardizing supplies in Europe.

The IMF has calculated that a complete disruption to Russia’s gas and oil supplies could potentially cost the European Union’s economy 3%.

Estimating the impact remains subject to major uncertainties, as we cannot predict today, for example, whether next winter will be long and harsh.

But in view of the possible effects on the economy, Alfred Kammer recommends alternative immediate measures.

“There’s no single option that’s likely to have a big impact on its own,” he admits. “But the accumulation of many small measures will have a greater effect.”

One of the measures is finding alternative sources of supply, and countries have already started to do this by turning to Algeria or Norway, he points out.

Consumers also play an important role in participating in the joint effort.

Governments can raise awareness through “information campaigns to reduce energy consumption”.

– Consumer –

“The consumer can act now,” emphasizes the head of the institute. “And the reduction in energy consumption makes it possible to store more gas (…), which can mitigate the impact of subsequent cuts”.

To speed up their energy transition, subsidies could be offered to the most vulnerable populations, he also suggests.

All these measures independently have a “modest” effect. But when added together, there is an accumulation effect.

Although the war in Ukraine severely slowed down growth in Europe, Alfred Kammer believes that “the recovery will not derail”.

“We don’t see a recession,” he added. The major eurozone economies, with the exception of Spain, will be “weak in 2022” and a quarter or two of near-zero growth, or even a technical recession with two negative quarters, are not ruled out.

However, the IMF expects these economies to recover in the second half of this year.

– “A blessing” –

Simultaneously with the energy challenge posed by the Russian offensive, European countries are confronted with the refugee crisis, which is weakening the budgets of certain economies such as Poland, which has taken in many Ukrainians.

The challenge is that a maximum of five million people who fled the conflict can return to Ukraine to help rebuild the country.

“Some of these refugees will definitely stay in Europe,” Alfred Kammer continued. But that’s not a bad thing, it’s even “a blessing” if integration succeeds, when countries are confronted with aging populations and labor shortages.

“However, it should not be too many,” because that would then jeopardize Ukraine’s recovery.

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