The IMF warns that Europe would lose almost three points of growth if Russia completely cuts off gas

Europe can deal with further restrictions on Russian gas, but a complete cutoff would be a "serious setback" that could cost the European Union up to 2.7 points of economic growth.

That is the conclusion drawn by the International Monetary Fund (IMF) from three papers on the issue that have been published this Tuesday and summarized by several of its authors in an entry on the agency's blog.

Economists lament the "lack of a joint action plan" of the Twenty-seven to "manage and minimize the impact" that a drastic decision by Russia would have.

Spain appears, among the community partners, as one of the best unemployed due to its low dependence on Russian gas.

But that does not mean that it would not suffer the consequences, with a loss of economic growth of up to 1.2 percentage points.

This is because the closure of Russian gas pipelines to Europe would have a cascading effect from one economy to another, causing new bottlenecks and problems in supply chains, and ultimately fueling inflation.

For other countries, the situation would be even more serious.

Hungary appears in the Fund's calculations as the worst off, since its GDP could fall by up to 6.5 points if it runs out of gas from Russia.

It is one of the territories that would see supply cuts.

The same would happen to Slovakia and the Czech Republic, with growth losses between five and six points.

In these three countries, gas demand would have to be restricted by up to 40% in the event of the closure of Russian gas pipelines.

And in Italy, one of the largest EU economies, the drop could reach up to 5.7 points due to its high dependence on gas to produce electricity, warns the Fund.

The direct impact does not stop there.

In fact, Russia has the ability to hit if it turns off the tap to the EU's largest economy, Germany, and also its neighbor Austria.

Its growth would be reduced by 2.8 and 2.6 points, respectively.

The rest of the countries could deal with alternative gas sources, although that would not prevent many from a strong economic corrective, with setbacks of around two GDP points for Slovenia, the Netherlands or Poland.

As a whole, the authors calculate that the Union would see its economy fall by up to 2.7 points.

This is in the harshest scenario, since two hypotheses have been worked on: an integrated market that is capable of substituting Russian gas for other sources (such as imports of liquefied natural gas) and delivering gas where it is needed, or one very fragmented with supply restrictions for certain countries.

In the kindest, the average of the Twenty-seven would lose less than half a point of growth and the most affected territories could mitigate the impact a lot.

If the worst forecasts are fulfilled, it would mean in many cases the entry into recession for some affected economies, which project lower growth this year and next.

Although the IMF does not put it this way,

0.2 points until June

At the moment, the IMF estimates, the gas restrictions derived from the Russian invasion of Ukraine have already cost the European Union 0.2 percentage points of growth in the first half of 2022. Russia is "its largest energy supplier," they recall. economists, but the volume of gas that comes from there has fallen by 60% since June last year.

Meanwhile, gas consumption was only 9% lower than in 2021 during the first quarter of the year.

The good news is that this has not caused an unsustainable situation: part of it has been replaced by liquefied natural gas (gas that can come from countries with which there is no gas pipeline connection, since it is lowered in temperature until it becomes liquid and is transported Boat).

"Our work suggests that a reduction of up to 70% in Russian gas could be managed in the short term,"

Pero un corte total, un escenario que preocupa más a los Veintisiete tras el cierre del gasoducto que suministra a Alemania por trabajos de mantenimiento, sería harina de otro costal. “La diversificación sería más difícil”, explican los economistas. Es decir, que traer gas de otros mercados o usar fuentes de energía alternativas resultaría escaso porque Europa tiene una “insuficiente capacidad de importación” y problemas para redistribuir entre países (España, por ejemplo, tiene seis plantas con capacidad de inyectar gas natural licuado en la red, tras devolverlo a temperatura ambiente, pero apenas tiene interconexión con el resto del continente).

In short, the more serious the lack of supply, the more Europe's problems would become apparent in order to remain, as it has been up to now, in the hypothesis of an integrated market.

“If physical limitations impede gas flows, the approximation of a fragmented market suggests that the negative impact on GDP would be especially significant”, highlight the Fund's economists.

And from one of the three papers presented this Tuesday, which focuses on Germany, they conclude that "the increase in wholesale gas prices would also increase inflation."

An unflattering outlook because experts believe that the different governments and parliaments "are moving quickly", but "they lack an action plan with which to manage and minimize the impact".

Among the fund's recommendations to deal with the situation are that of "ensuring the supplies of the global liquefied natural gas markets", "alleviating the bottlenecks of the infrastructures to import and distribute gas" or planning the way to share supply in the entire EU in an emergency.

But they also call for "encouraging energy savings while protecting vulnerable households" and preparing "gas rationing programs."

In the movements that have taken place so far, the researchers see "a gap between ambition and reality."

And they criticize that "many countries have chosen policies that strictly limit how wholesale prices are transmitted to consumers."

A "better alternative", they consider, would be to allow the rise in prices to permeate to "incentivize savings",