Moscow/Brussels – Russia has announced to stop the supply of gas from the ‘Nord Stream 1’ pipeline for an indefinite period of time as the technical defects have not been resolved. Russia’s announcement sent shockwaves throughout Europe. Gas prices in Europe have increased by 30 per cent. At the same time, Europe’s leading stock market collapsed, and the value of the euro, the eurozone’s currency, fell to its lowest level in two decades. Analysts have warned that Europe is at risk of a recession due to energy shortages, rising prices and the fall of Europe’s markets and currency.
Last month, Russia’s leading company Gazprom, announced that the Nord Stream pipeline would be shut down for repairs from August 31 to September 3. But on Saturday, Russia informed that the gas supply would be stopped indefinitely, saying that a fault was found in the pipeline. Following Russia’s announcement, several European countries announced additional funding and other relief packages for the energy sector. Despite it, the European stock and currency market was hit hard.
On Monday, the stock indices in France and Germany, the leading economies in Europe, fell. After that, the ‘Euro STOXX 50’ and ‘STOXX Europe 600’ indices, the central stock indices in Europe, also fell. The STOXX Europe 600 fell by one per cent while the Euro STOXX 50 fell by over three per cent. The euro was then down one per cent to $0.9880 in Monday’s trade. This is the lowest the euro has sunk to since 2002. The prices of oil and gas have also risen sharply. Monday recorded a 30 per cent increase in the natural gas prices.
The concrete effects of the indefinite shutdown of Russian energy supplies have not yet begun to emerge. However, without energy, Europe’s growth could be stunted. As a result, the euro’s value will fall further, claims Australian analyst Rodrigo Cali. German economist Holger Schmieding warned that the sharp surge in oil and gas prices, the risk of shortages in energy supply and changes in credit policy could affect Europe’s growth rate.
Meanwhile, due to the ongoing decline in China’s economy, the exports of countries like Germany, France and Italy, major economies in Europe, have been hit. Europe’s manufacturing sector has also declined over the past few months, and the sector’s index has fallen to its lowest level since February 2021. The widening scope of the energy crisis, the rise in inflation, the hit to production and exports, and now the fall in the euro currency along with the stock markets are all factors that indicate the risk of Europe’s economy going into recession, analysts have claimed. A UK-based think tank recently warned that the Russia-Ukraine war, record inflation and scarcity of essential commodities are creating a state of instability, increasing the risk of civil unrest across the globe.