Gas is flowing again! But an acute energy crisis has by no means been averted, writes Esther Reichelt, FX and EM Analyst at Commerzbank.

Key Quotes:

“The EU yesterday called for a significant reduction in gas consumption of 15% over the next eight months and is threatening mandatory rationing. But the EU continues to steer almost blindly through the crisis. Neither can the success of savings measures be reliably estimated, nor is it known which gas supply it will be able to draw on at all. The Russian president has already announced a further reduction in the supply volume for next week, and a complete supply freeze cannot be ruled out.”

“This means that a significantly higher euro risk premium remains justified. This is because the threat of a gas shortage puts a double burden on the single currency. Even if rationing could be avoided, the economy faces a significant structural change away from cheap Russian gas, which will weigh on potential growth and return prospects in the euro area. At the same time, high gas prices are fueling inflation and reducing the purchasing power of the euro.”