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

What’s Happening

Top Jobs | The EU is considering a German proposal to ban the bloc’s nationals from holding high-paying roles in Russian state-owned companies, sources tell us. The proposal, if it goes through, would cast a wide net over EU citizens — such as former German Chancellor Gerhard Schroeder.

Unprecedented Damage | Russia’s energy conflict with Europe escalated dramatically as three pipelines were wrecked in suspected sabotage and Gazprom PJSC warned that the last remaining route to western Europe is at risk. While Germany suspects sabotage, the EU Commission said it has yet to determine the reason for the leaks.

Climate Risks | European regulators are considering whether to make potential losses from climate change a regular part of bank stress tests, we’re being told. While the discussions in the EBA board of supervisors started this month, climate would only be included in 2025 at the earliest. 

Crypto Control | The plunging appetite for cryptocurrencies doesn’t mean authorities should drag their feet on regulating them, according to European Central Bank Governing Council member Francois Villeroy de Galhau. “We should be extremely mindful to avoid adopting diverging or contradictory regulations, or regulating too late,” Villeroy said in Paris.

Nuclear Power | France is accelerating its plan to boost the production of nuclear energy, with work starting on its first EPR2 reactor before the end of President Emmanuel Macron’s second term, the minister for energy transition, Agnes Pannier-Runacher, told local radio. 

Dirty Secret | Blue ammonia is a little-known fuel made from hydrogen that’s billed as a potential clean answer to Europe’s energy woes. Yet it has a dirty secret. The C02 captured in its production has been used by some of the world’s biggest oil producers to extract fossil fuels difficult to reach, raising concerns it will be the latest manifestation of greenwashing. 

In Case You Missed It

Tax Havens | The EU is set to add the Bahamas to its blacklist of governments its considers uncooperative because it says the archipelago continues to facilitate the operation of offshore firms for tax evasion. The bloc is also expected to include the Caribbean nations of Anguilla and Turks and Caicos next week, we have learned. 

Raise expected | The ECB will probably hike interest rates by 75 basis points at its October and December meetings, according to Goldman Sachs. Economists led by Jari Stehn had previously seen a more moderate increase, but now “believe rising inflation in the fourth quarter will make it difficult to step down the pace of hiking,” they said in a note.

Vaccine Review | The European Medicines Regulator has started evaluating an application for the authorization of an adapted version of Moderna’s Spikevax vaccine targeting the original virus that causes Covid-19 and its omicron subvariants BA.4/5, EMA said yesterday. 

Energy Secured | Italy has sourced enough alternative gas supplies from Algeria and Egypt to make up for any shortfalls this winter if Russia were to immediately cut off all exports, we were told. The boost will cover the remaining supplies Italy still gets from Russia. The country originally expected to achieve independence from Russian gas by spring 2025. 

Chart of the Day

Tens of thousands of solar panels are sitting unused in warehouses across Europe just as the continent struggles with an unprecedented energy crisis. Demand for solar from households and businesses is soaring and the supply of panels is rising to meet it, but there aren’t enough engineers to install the rooftop modules to keep up. “Installers in many countries are fully booked for the next weeks and months,” said Dries Acke, director of Brussels-based lobby group Solar Power Europe. For Belgium or Germany, panels ordered now might not get installed before March.

Today’s Agenda

All times CET.

• 9:20 a.m. ECB President Christine Lagarde keynote remarks at Atlantic Council Frankfurt Forum on US-European GeoEconomics
• 4.45 p.m. Commissioner Paolo Gentiloni keynote remarks at Atlantic Council Frankfurt Forum
• Weekly European Commission College meeting
• European Commission Vice-President Frans Timmermans launches Biomethane Industrial Partnership
• EBRD President Odile Renaud-Basso meets Commissioner Kadri Simson and other commissioners