How Italy and other European countries could be affected by gas shortages this winter

What are the implications from a possible Russian gas cut-off for the euro area?

Chris Liverani on Unsplash

17 October 2022, 16:55

Which parts of Europe will suffer most from the lack of gas supplies from Russia? Economist Intelligence (EIU) answers in its Global Economic Outlook, and this is how Italy and other European countries could be affected by gas shortages this winter.

"We assume," reads the report, "that Russian gas flows to Europe via the Nord Stream pipeline will remain at zero in the coming months. Gas rationing in winter 2022/23, coupled with a further spike in electricity prices, will cause an economic recession across the region; we expect an economic contraction in the eurozone in 2023, with annual recessions in Germany, France, Italy, Spain, the Netherlands and elsewhere. The UK will also enter recession".

The report also adds that the depth of the energy crisis will depend on how the temperatures go this winter, how well EU cooperation (both demand reduction and gas sharing) holds up, and the activity of companies, the impact of which will vary from country to country.

Austria and Germany, which rely heavily on Russian gas and have limited supply alternatives, will face shortages and plan to use rationed gas. Landlocked central European countries such as Slovakia and the Czech Republic will experience a triple shock due to energy shortages, high inflation and the spillover effects of the recession in Germany.

When it comes to Italy, which relies heavily on gas, the country will similarly be severely affected. The government is urging residents to turn down heating this winter, as energy saving measures are announced in the country.

Elsewhere in Europe (e.g. in Spain and the UK), the main impact will be high, energy prices will further push up inflation, as will falling confidence and weak foreign trade.