European Economy Hits Rock Bottom as Energy Crisis Drives Recession — Citigroup Predicts Certain Downturn in Europe

Europe’s Recession Fears: Energy Prices on a Wild Ride

Citigroup’s top boss, Jane Fraser, was quick to point out that Europe is heading into a recession. The culprit? A soaring energy crisis triggered by Russia’s invasion of Ukraine.

EU Hits the Gas (and the Price Tag)

The EU announced its sixth round of sanctions against Russia, pushing fuel prices to record highs.
Britain and other European nations are feeling the squeeze as living costs climb.
Some policymakers worry that a harsh winter could force energy rationing.

Fraser’s Take on the Winter Woes

According to Fraser, the biggest scare is the price of heating. She warns, “If it’s a nasty winter, people won’t be able to afford to keep their homes warm.” However, she adds a sliver of optimism: “If the winter is mild, the energy sector likely has enough supplies to survive.”

She cautions, though, that cold weather or droughts affecting renewable sources could spell trouble. And she notes that cutting Russian gas “soon” leaves the EU with a lingering tail risk.

Inflation, Central Banks and the Consumer Tango

Fraser says the European Central Bank is lagging behind the U.S. in fighting inflation.
She predicts that this will hit consumers hard, “hammering them with energy costs and inflation.”
While Asian supply chains are quick to recover, Europe may have to weather a tougher storm.