Author：Bloomberg
Surging energy costs due to the war in the Middle East are the latest reminder for Europe to urgently reduce its reliance on fossil fuels, one of the European Central Bank’s top officials wrote in an op-ed published by the Financial Times.
The continent’s energy dependence has become a critical vulnerability, according to Executive Board member Frank Elderson. Russia’s invasion of Ukraine in 2022 exposed its weakness, and the reaction of oil and gas prices to fighting in and around Iran has highlighted “how little this dependence has changed.”
“Europe cannot eliminate geopolitical risk, but it can significantly reduce its exposure to it,” Elderson, a strong climate advocate, wrote. “The most effective way to do that is by cutting reliance on imported fossil fuels and accelerating an orderly shift to home‑grown clean energy.”
He added that if Europe were to meet its green-energy targets, “the link between domestic energy prices and volatile global energy markets would weaken substantially.”
The euro area saw its steepest jump in inflation since 2022 last month after the Iran war pushed energy costs sharply higher. Policymakers including President Christine Lagarde have signaled they’re ready to respond should expectations for future gains start spiraling. Traders are betting on at least two interest-rate hikes this year.
Elderson argued that repeated energy-price shocks make it “increasingly difficult” for the ECB to reliably deliver inflation at its 2% target.
ECB staff estimated that in a severe scenario, inflation in the 21-nation euro zone would surge past 6%, while the economy slips into a recession this year.
The adoption of domestically produced, clean and sustainable energy would strengthen macroeconomic stability, lower long‑term costs, support growth, deliver health benefits and enhance Europe’s strategic autonomy, Elderson said.
“The real question is no longer whether Europe can afford to make the energy transition,” he added. “It is whether it can afford not to. From a central-banking perspective, the answer is clear.”
