(Bloomberg) — Europe can avoid recession if monetary and fiscal policy makers can agree on effective measures to deal with soaring energy costs, according to the European Commissioner for Economics Paolo Gentiloni.
“We have the chance, if we work together, monetary policy and fiscal policy, and with the right energy package now, to avoid recession,” Gentiloni told reporters ahead of a meeting of finance ministers in the EU in Prague on Friday. “It’s a challenge, but it’s possible.”
Europe is grappling with its worst energy crisis in 50 years as Russia cuts supplies in retaliation for sanctions imposed for its invasion of Ukraine. A surge in inflation intensified a cost of living crisis, pushing European economies to the brink of recession.
Leaders are negotiating a price cap on Russian gas imports even after President Vladimir Putin warned that Moscow would halt supplies if such a mechanism were introduced.
Last year, Russian gas covered around 40% of EU demand. Most countries are finding alternatives to Russian supplies, but households and businesses are likely to face forced power cuts during the colder winter months.
The European Central Bank on Thursday lowered its growth forecast for the euro zone next year to just 0.9% from 2.1%.
“There is a risk of recession,” Luxembourg Finance Minister Yuriko Backes told reporters in Prague, adding that officials had “a big responsibility to take action and not let it go.”
“We need to coordinate measures at EU level because measures taken in one country have an impact on neighbours,” she said. “We are under inflationary pressure, we all have to take responsibility to support businesses and households.”
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