If the Strait of Hormuz were to remain closed for an extended period, we could experience the largest energy crisis in history

Uncertainty and the duration of the crisis are the main factors that will determine the economic impact on Europe, National Economy and Finance Minister and Eurogroup President, Kyriakos Pierrakakis, said during a discussion with Alfred Kammer, Director of the European Department at the International Monetary Fund, at a public event held at the Fund’s headquarters entitled “Europe Under Pressure: Securing Growth and Resilience in a More Fragile World.”

As he noted, the scale of the crisis could exceed previous historical precedents, stressing that “should the Strait of Hormuz remain closed for a prolonged period, the crisis could evolve into the largest energy crisis in history.” In this context, he observed that during the oil crises of the 1970s, supply losses amounted to approximately 10 million barrels per day, compared with around 13 million barrels today.

Impact

Against this backdrop, the President of the Eurogroup underlined that the effects are already evident in energy prices and in the cost affecting households. He placed particular emphasis on the importance of targeting support measures toward the most vulnerable segments of society, noting that the effectiveness of policy intervention depends on the proper allocation of limited resources under conditions of uncertainty. “We must do everything within our capacity to support, above all, the most vulnerable,” he stressed.

Referring to the Greek experience, he highlighted that the government implemented targeted measures, such as fuel subsidies for households and support interventions for businesses, while avoiding horizontal, non-targeted tax cuts that would have had a more permanent fiscal impact. Regarding the cost of these interventions, he noted that current measures amount to approximately 0.2% of GDP, compared to around 2.5% during the 2022 crisis. In this context, he underscored that the key challenge for governments is to strike a balance between fiscal discipline and social support, particularly in an environment of economic uncertainty, high interest rates, and high public debt.

“A European Energy Union would enhance overall competitiveness”

Pierrakakis underlined that Europe appears more resilient compared to the period of the 2022 energy crisis, thanks to greater diversification of energy sources and the investments made in infrastructure since then. With regard to the structural profile of the European energy market, he noted that “we still import approximately 57% of our energy,” a fact that renders the European economy vulnerable to external shocks. This reality, he argued, underscores the need to accelerate investments in networks, storage systems, and energy interconnections.

He made particular reference to the need to advance energy integration, emphasizing that “the promotion of a fully-fledged European Energy Union would have an immediate and positive impact, not only on the energy sector but also on overall competitiveness.” At the same time, he highlighted that “47% of electricity generation now derives from renewable sources,” while noting that this progress does not diminish the need for further infrastructure investment.

Moreover, the Minister of National Economy and Finance expressed concern over signs of a slowdown in certain Member States in terms of the green transition, noting that the energy crisis could either act as a constraint or as a catalyst for reform, depending on the policy choices adopted.