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Despite Russia's stoppage of gas supplies, Europe could overcome its energy crisis this winter, Noble laureate and top economist Paul Krugman said on Friday.

"The physical scarcity of gas, while real, shouldn't be crippling … Europe should be able to get through the winter without freezing," he wrote in a New York Times op-ed, pointing to higher-than-normal energy reserves across the European Union and availability of some alternative energy sources.

Norway has replaced Russia as Europe's number one gas supplier, and the EU recently reached its 80% gas storage target two months ahead of schedule.

However, the dilemma is financial and social, Krugman warned. Letting market forces play out is the efficient policy response. Still, it is also "grotesquely inequitable" as energy producers with low costs earn massive profits while families face financial mayhem from energy bills, he said.

"There's also a macroeconomic risk. Europe still has powerful unions, and some of them will be in a position to demand wage increases to offset a soaring cost of living. The result could be a wage-price spiral that would be costly to unwind. So just letting energy prices rise isn't really an option," he explained.

Eurozone inflation is already skyrocketing and hit an annual rate of 9.1% in August. Russia cutting gas flows indefinitely on the critical Nord Stream 1 pipeline could worsen it. Dutch TTF futures, the European benchmark for natural gas, added 28% to 268 euros per megawatt hour. And German baseload year-ahead power, the European benchmark for electricity, soared 23% to 625 euros per megawatt hour. 

The EU has proposed a price cap on gas and electricity rationing to control energy prices. The EU previously agreed to a voluntary 15% gas usage cut, but electricity demand has only decreased by 2.2% since the start of Russia's invasion on Ukraine, according to Rystad Energy.