Despite gas crisis and inflation surge, Eurozone economy grows faster than expected

The second quarter of this year saw an acceleration in the euro zone’s economic growth, but as long as Russia keeps cutting back on gas supply, the region’s prospects will suffer. According to Eurostat, the European Union’s statistics office, the 19-member bloc’s gross domestic product increased by 0.7 percent in the second quarter, exceeding forecasts for a 0.2 percent increase. It follows a GDP growth rate of 0.5% in the first quarter.

The figures show that the euro zone is still gaining from the reopening of its economy following the epidemic, in stark contrast to the negative annualised readings coming out of the United States for both the first and second quarter.

However, an increasing number of experts anticipate that the euro zone will enter a recession in 2019. Nomura, for example, forecasts a 1.2 percent annual contraction, while Berenberg forecasts a 1% decline.

Even the EU’s executive body, the European Commission, has acknowledged that if Russia entirely cuts off the region’s gas supplies, a recession might start this year.

European officials are becoming more anxious about the likelihood of a gas supply interruption after European Commission President Ursula von der Leyen claimed that Russia is “blackmailing” the continent. Russia has consistently denied attempting to weaponize its supplies of natural fuel.

Although this week saw a 20% reduction in gas deliveries to Europe via the Nord Stream 1 pipeline, Gazprom, the majority state-owned energy powerhouse of Russia, continued to operate at full capacity. Twelve EU nations currently have partial Russian gas supply problems, and a few more have had their gas supplies entirely cut off.

The most recent growth data, according to European Economics Commissioner Paolo Gentiloni, is “good news.”

(With inputs from agencies)

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