Europe’s Recession May Mirror Financial Crisis

Europe’s Recession May Mirror Financial Crisis

Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union.

With a continent-wide recession now seemingly inevitable, a harsh winter is coming for Europe’s chemical producers, steel plants and car manufacturers that have joined households in sounding the alarm over rocketing energy bills. Building on a model of the European energy market and economy, the Bloomberg Economics base case is a 1% drop in gross domestic product, with the downturn starting in the fourth quarter. If the coming months turn especially icy and the bloc’s 27 members fail to share scarce fuel supplies efficiently, the contraction could be as much as 5% — a recession about as deep as the 2009 financial crisis. At the same time, Europe’s frenzied buying of liquefied natural gas means it’s likely to have enough of the power-generation fuel to offset supplies from Russia, according to Bloomberg research. But just like the economic development, this will depend on how cold the winter gets.

— Katharina Rosskopf

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