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While a slide in imports accounts for some of the correction, Greece boosted its exports outside the EU by about 30 percent in the fourth quarter of 2012 from the previous year, while Italy’s rose 13 percent in January from a year ago, he said.

The metamorphosis is known as internal devaluation

Prevented by membership of the euro from driving down currencies, governments and companies are squeezing labor costs to spur productivity.

On average, the periphery is about halfway to eliminating large structural current-account deficits, which allow for declines related to recession-driven weaker import demand, estimates Goldman Sachs (GS).

The OECD today published an index showing that relative labor costs in Spain and Portugal have now dropped below Germany’s for the first time since 2005.

“It’s potentially good for the economy but only if it results in faster investment,”

“If not then there’s a downward spiral risk.”

A new energy corridor has just been sanctioned that will bring Caspian gas being developed by a BP-led consortium into the heart of Europe.

And countries such as the UK are moving ahead with developing their substantial reserves of shale gas.

There are 20 operational LNG regasification plants in the EU, with a combined import capacity of about 198 bcm of gas per year. A further 30 bcm/y are under construction. But Europe’s terminals are conspicuously underused. Imports of LNG have fallen sharply, partly because of the 2011 Fukushima nuclear disaster, which prompted Japan to switch to gas-fired generation and diverted LNG cargoes from Europe.

The question is: are European customers prepared to pay Japanese prices for LNG?” says one Brussels-based European gas industry official.

Arguably a more urgent task is to improve energy security by unifying the EU market – in particular, linking up the countries of eastern Europe.

If Europe is serious about reducing its dependence on Russian gas, it will have to take radical measures. Bernstein’s Mr Clint lists some: switching from gas to diesel power, closing gas-intensive industries such as oil refining, reducing gas consumption in heating and adding more coal-fired generation – which would inevitably increase carbon emissions.

Europe accounts for half of Gazprom’s gas revenues, according to the company, and 71 per cent of Russia’s crude oil exports, according to the International Energy Agency.

A growing share of oil, largely from Rosneft, is flowing directly to China by pipeline. Lukoil last week started commercial production at its enormous West Qurna field in Iraq – much of whose production is likely to be sold in Asian markets, analysts say. And Novatek, together with CNPC of China, is building an LNG terminal that will help shift gas exports towards Asia.