“Energy security in Germany and in Central and Eastern Europe is crucial for our economic future”

DSince the start of the war in Ukraine in February 2022, Germany and the countries of Central and Eastern Europe have been experiencing an extraordinary energy shock. In the space of six months, their main supplier of natural gas, Russia, has almost completely halted its deliveries. Gas played a central role in the region’s primary energy mix, representing more than 20% of its supplies.

Financial analysts now predict that gas prices in Europe over the next decade will be significantly higher than in the United States and compared to the pre-war period. This “weaponization” of energy by Russia was generally welcomed with firmness and, with a few exceptions, the region did not give in to Russian blackmail.

On the contrary, a massive adjustment of the energy system is underway. From a macroeconomic point of view, the energy price shock represents a massive deterioration in the terms of trade of the European Union (EU) and Germany: the current account surplus of the EU turned into a deficit for the first time since 2008 as Europe had to import energy at much higher prices and its exchange rate weakened against the dollar, the bill settlement currency energy.

The feared economic collapse has not happened

A large number of gas-intensive commodity producers in Central and Eastern Europe have been severely affected. Many industrial processes depend directly or indirectly on gas as an energy source. Industry accounts for 27% of total gas consumption in the EU, with this share even higher in Germany and Central and Eastern Europe.

German industry works with thousands of suppliers in neighboring countries. Poland and the Czech Republic are reliable trading partners and sources of stability in times of crisis. Trade with the Visegrad Group countries (Hungary, Poland, Czech Republic, Slovakia) even exceeds trade with China.

Energy security in Germany and in Central and Eastern Europe is therefore of paramount importance for our economic future. In Germany, considerable energy savings have been achieved without causing the feared economic collapse, thanks to adjustments by industry and households to new economic conditions.