Professor Damien Ernst of the University of Liege in Belgium is making startling predictions about the economic future of Europe, if something is not done to lower energy prices. In an interview with French news site Atlantico on Monday, Ernst predicted that if energy prices are not contained, Europe is going to see mass impoverishment, and he noted there is no indication the energy situation is going to improve anytime soon.
In the interview he predicted that, “the perfect storm” that has formed in energy markets will have a massive impact on household and businesses, and that as time goes on it will be inevitable that EU households will begin to fall behind on their energy bills.
In Belgium, Ernst predicted that households will, on average, end up paying €10,000 ($10,000) per year for power and heating. Already, in Ireland, there are accounts emerging on social media of small businesses with bi-monthly power bills as high as €9,836 ($9,800), before the onset of winter, which is expected to produce a surge in prices for energy.
Ernst went on to say the energy crisis that is fast approaching in the EU will dwarf the 2008 financial crisis and the oil crises of the 1970’s. He added, “This will have economic consequences, especially for purchasing power, and lead to financial constraints.” He went on to warn that, “it will be impossible to control inflation,” with the jumps in energy prices which appear now to be unavoidable.
In addition, as inflation takes off, it will begin to curtail sales and crush the economy itself, leading to unemployment, even before central banks attempt to constrain the inflation with massive interest rate hikes and tightening of the money supplies, which itself will further cut sales and produce unemployment.
The energy market was already tight at the beginning of the year, as economies reopened after the pandemic and the new energy demand ramped up into markets which had not yet increased output to meet it. Then the market was shocked as Russia began its special military operation in Ukraine. Western sanctions followed, which removed Russian crude from Western markets, and that led to disputes over payment mechanisms for natural gas supplies from Russia, which further restricted Russian natural gas flows. Then technical issues with pipeline supplies saw the Nord Stream pipeline flows cut to 20% of normal capacity on the heels of everything else.
Europe meanwhile, which had been attempting to “green” its energy infrastructure, found itself reopening shuttered coal plants and relying on nuclear electricity as it scrambled to store as much gas as it could to try and get its populations through the cold European winter.
However none of that could make up for the Russian natural gas on which Europe’s entire energy infrastructure had become so dependent.
