The war in Ukraine was to hit the European economy hard. In the end, the shock promises to be much less severe than expected, in addition to providing Europe with another of those crises that will have enabled it to strengthen its union a little more.
Things were looking very bad for Europe after Russia invaded Ukraine a year ago. In addition to grappling with the human and geostrategic drama of a terrible war in their backyard, the countries of the European Union suddenly remembered that the aggressor in this story accounted for 40% of their gas imports, for 30% of those of oil and for 46% of those of coal. And that, unlike the last two fossil fuel sources, it was not going to be easy to replace the Russian gas supply if the urge to turn off the tap took hold of Vladimir Putin.
Coincidentally, all sorts of “technical problems” and mysterious “acts of sabotage” quickly befell the Nord Stream 1 and 2 gas pipelines as the economic sanctions against Russia piled up, until nothing works at the beginning of autumn. But, before that, the price of gas on the continent had already had time to climb to 338 euros per megawatt hour, or 15 times its historical average, recalled Tuesday The world.
To do wrong, French nuclear power stations and hydroelectric power stations in southern Europe have also had to reduce their production, some because of urgent maintenance work and others because of a record drought, underlined at the beginning of the month the Peterson Institute for International Economics in a brief analysis.
However, the euro zone did rather well last year, the International Monetary Fund noted three weeks ago, with a respectable growth of 3.5% when it was not predicted more than 2.6% this summer. In addition, it should escape the short recession that it was still predicted recently for this year, with growth – modest it is true, but all the same – of almost 1%, the European Commission predicted last week.
At the same time, the price of gas on the continent fell to around 49 euros per megawatt hour, its lowest level in 18 months, well before the start of the war. As for gas reserves, they are, at 66%, exceptionally high for this time of year and should be full towards the end of the summer. “It is extremely unlikely that Europe will run out of gas either this winter or the next,” an Oxford Economics analyst quoted in the article World.
Luck and a turn
The failure of the energy war that President Putin wanted to wage on Europe is due as much to luck as to the latter’s ability to adapt. It is true that the Europeans were treated to a mild winter. This, along with rising prices, largely contributed to the 12% decrease in gas consumption in 2022, another article by the World.
But that’s not all. Yes, Europe has revived a few coal-fired plants, but that rebound was short-lived, with coal-fired power generation in the last four months of 2022 being lower than a year earlier. Europe has also found new sources of gas supply, notably in Norway, Qatar, Algeria and the United States (in the form of liquefied natural gas).
It has also accelerated its transition to renewable energies. Propelled among other things by a spectacular increase of 25% in the production capacity of its solar park, Europe has thus seen for the first time solar and wind power produce more electricity than gas or oil. As demand for electric vehicles has also accelerated and sales of geothermal heat pumps have exploded, European CO2 emissions2 fell 0.8% to their lowest level in 30 years in November, said The world.
At first tempted by every man for himself, Europeans have found the path of cooperation again with coordinated storage policies, common purchasing platforms and an agreement in principle on a reform of their electricity market, observed The echoes at the end of last year.
This prompted the head of the International Energy Agency, Fatih Birol, to say last December that the Ukrainian crisis should mark “a historic and definitive turning point towards a cleaner, more affordable and more secure energy system”.
Grow from crisis to crisis
This is not the only change that the invasion of Ukraine has caused in Europe.
Usually timorous when it comes to common defense policy, European Union members have agreed for the first time to use 3.6 billion euros from a fund called the “European Peace Facility” to buy weapons destined for Ukraine, noted the Robert Schuman Foundation in an analysis at the beginning of the year.
The EU also agreed in June to consider the candidacies of Ukraine and Moldova as future member countries. Their names join those of several other Eastern European countries, such as Albania, North Macedonia, Serbia and Montenegro, which have also embarked on the long and uncertain process of joining the club of 27. Meanwhile, Croatia has just joined the euro zone as well as the Schengen area of free movement of persons. And Bulgaria would like to be able to do the same soon.
It would not be the first time that a crisis would bring the European project to a new stage, observed more than one expert at the start of the year 2023, which notably marks the 30e anniversary of the single European market and its free movement of goods, services, people and capital.
The euro crisis in the 2010s also forced a modernization of its governance and economic intervention mechanisms. The COVID-19 pandemic has seen the establishment of a policy of common purchase of vaccines and the adoption of a vast European program for the recovery and modernization of the economy amounting to 750 billion euros. As for recent efforts by the United States to attract companies in the technology and clean energy sectors with subsidies, they should soon find a similar European industrial policy in their way.
“I always thought that Europe would be made in crises, and that it would be the sum of the solutions that we would bring to these crises”, had moreover written in his memoirs one of its founding fathers, Jean Monet.