Germany risks recession as gas crisis deepens

Germany risks recession as gas crisis deepens

Germany faces certain recession if faltering Russian gas supplies stop completely, an industry body warned, and Italy said it would consider offering financial backing to help companies refill gas storage to avoid a deeper crisis in winter, Reuters reported.

Gas prices have hit record levels, driving a surge in inflation and adding to challenges for policymakers trying to haul Europe back from an economic precipice.

The slowdown has hampered Europe's efforts to refill storage facilities, now about 55% full, to meet an EU-wide target of 80% by October and 90% by November, a level that would help see the bloc through winter if supplies were disrupted further.

The benchmark gas price for Europe was trading around 126 euros ($133) per megawatt hour (MWh), below this year's peak of 335 euros but up more than 300% from a year ago.

Countries other than Italy, including Austria, Denmark, Germany and the Netherlands, have activated the first early warning stage of a three-stage plan to cope with a gas supply crisis.

"As it stands today, we have a problem," Bundesnetzagentur President Klaus Mueller said on the sidelines of an industry event.

Soaring European prices have attracted more liquefied natural gas (LNG) cargoes, but Europe lacks the infrastructure to meet all its needs from LNG. Disruptions to a major U.S. LNG producer added to the challenge.

Europe is seeking more pipeline supplies from its own producers, such as Norway, and other states, including Azerbaijan, but most producers are already pushing the limits of output.

The state energy agency said supplies remained robust but it was signalling "to industry players and gas consumers connected to the western Swedish gas network, that the gas market is strained and a deteriorating gas supply situation may arise".

Sweden, where gas accounted for 3% of energy consumption in 2020, depends on piped gas supplies from Denmark, where storage facilities are now 75% full. Denmark activated the first stage of its emergency plan on Monday.

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