EU economy still grappling with long tail of 2022 energy shock

(EurActiv, 1 Jan 2024) Although gas and electricity prices have receded below their 2022 peak, they are not forecast to return to pre-pandemic levels in the foreseeable future, the European Commission said on Monday (15 January), warning of the long-term economic consequences of high energy prices on the EU’s competitiveness.

European businesses “continue to face different energy costs with consequences for their growth,” the EU executive warned in a note to the Eurozone’s 20 finance ministers who were in Brussels for a regular meeting.

In particular, the EU’s high gas import-dependency “has widened the relative disadvantage of European producers with respect to the USA”, the world’s largest gas-exporting country, where companies benefit from access to cheaper energy, the Commission said.

“This will weigh on the euro area current account balance and have wider economic consequences,” the EU executive warned.

The surge in gas prices has sent electricity prices through the roof in 2022, prompting a reform of the EU’s electricity market to decrease the Union’s exposure to volatile gas prices.

Asymmetric shock

But while the 2022 energy shock impacted the entire euro area, “some member states were affected more than others,” the Commission paper added, saying this is posing challenges in terms of inflation and competitiveness.

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EurActiv, 16 Jan 2024: EU economy still grappling with long tail of 2022 energy shock