The worst-case scenario for the euro zone: A highly inflationary recession

A highly inflationary recession in the euro zone is of course the worst-case scenario for late 2022 and 2023. This scenario would occur if: Russian natural gas exports to the euro zone all but come to a halt , leading to both a very sharp rise in energy prices and a loss of production; Global oil market pressures continued; Wages caught up significantly to correct the loss of purchasing power in 2022; Fiscal policies remained expansionary. This configuration of a recession with very high inflation is not out of the question and would create a major headache for the ECB.