EU nightmare! Europe could face biggest financial crisis ever if Putin turns off gas tap

Russian gas 'could' be used to 'derail European Unity' says expert

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Since the start of June, gas flow along the Nord Stream 1 pipeline between Russia and Germany has been 60 percent lower than the standard flow over the last five years. The pipeline was shut on July 10 for its annual 10-day maintenance but there are surging fears Vladimir Putin may completely cut gas supplies, with one expert warning he could use this as a “political weapon against the European Union”. Earlier this week, the euro plunged below the value of the US dollar for the first time in nearly 20 years as concerns surge over the state of the continent’s single currency.

This has only added to the nightmare scenarios facing the Eurozone area in that it could spiral into a hugely damaging recession before the end of this year.

Thanim Islam, Market Strategist at international business payments specialist Equals Money, told Express.co.uk: “A recession is looking more and more likely with every passing day.

“In fact, according to a recent Bloomberg survey, the chances have increased from 30 percent to 45 percent – and this could go higher still.

“It’s hard to predict exactly when a recession could occur – but there’s a very good chance it will happen before the end of the year.”

Mr Islam said even before the onset of a Eurozone recession, the EU had already been struggling with the continued fallout from the war, with energy and food prices surging.

He warned a recession would only “amplify this problem”, adding: “The dependency on Russian gas and the fear of supplies being cut off will also have a huge impact on the population, especially going into a cold winter.”

But the financial expert warned the biggest problem facing the ailing economy is the prospect of Putin cutting gas supplies into Europe in revenge for the crippling sanctions Russia has been hit with during the Ukraine war.

Mr Islam said: “The prospect of an energy shortage threatens to plunge the eurozone into recession, with rising inflation in the bloc also adding to rising recession concerns.

“The last economic sentiment data from the ZEW survey in Germany suggests confidence is at its lowest since 2011, and recently the German Economy Minister Robert Habeck suggested that the fear of recession is overwhelming.”

Worse still, he warned the European Central Bank now finds itself in a “very tricky position” over how to battle soaring inflation, and that a hike in interest rates could actually tip the Eurozone into recession.

All eyes will now be on the central bank as to how it decides to deal with this critical situation, but the expert explained how it may face another huge problem.

When asked if Europe could be facing one of the biggest financial crises it has ever seen, Mr Islam replied: “Potentially.

“The ECB are in a difficult position in balancing the fight against inflation with the impact of growth.

“The Bank has shown its intention to join other central banks in raising interest rates, but the difference between the ECB and other banks is the problem of fragmentation.

“Fragmentation occurs when the ECB alters monetary policy, and the effects of the changes are not felt the same across all the nations in the eurozone. So, a hike in interest rates would be felt more by indebted nations.

“We have already seen this year spreads between Italian 10-year bond yields and German 10-year bond yields widen dramatically due to concerns around how the ECB will deal with this phenomenon.”

In a further warning, he concluded: “The ECB are currently in the process of fleshing out the details of a tool to combat the threat of fragmentation.

“But failure to do so, coinciding with the threat of a recession, could create a massively destabilising effect on the Eurozone economy.”

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