Germany has a deep recession, heavy losses if it cuts off Russian gas

According to the report of 5 economic institutes VirtueThe country will lose 220 billion euros ($238 billion) in economic output over the next two years if such a shock occurs. Germany’s GDP will grow by only 1.9% in 2022 and decrease by 2.2% in 2023. Growth will be 2.7% this year if Russian gas is still present, according to CNN.

Stefan Kooths, research director at the Kiel Institute for the World Economy and one of the report’s authors, said that Russia’s gas cuts would push Europe’s largest economy into a “strong recession.” .

Russian military campaign in Ukraine led to unprecedented economic sanctions against Moscow, including a ban on Russian oil and gas.

EU leaders agreed to phase out Russian coal imports. An EU source told CNN that coal will be banned in August. A sixth round of sanctions is under discussion and some EU officials have called for action on Russia’s oil and gas exports.

But a near-term Russian gas ban will wreak havoc on Germany, which depends on Russia for 46 percent of its natural gas by 2020, according to the International Energy Agency. Germany uses gas for heating, generating electricity and powering factories.

The European Union is trying to cut Russia’s gas imports by 66% this year and break its full dependence on Russian energy by 2027.

Last week, German Finance Minister Christian Lindner said the country was working “as quickly as possible” to reduce its dependence on Russian energy, but not immediately.

“The question is where do we harm Russia more than ourselves? If I follow my heart, there will be an immediate embargo on everything. However, I doubt this. It is difficult to stop the war in the short term,” Lindner said in an interview with Die Zeit newspaper.

Targeting Russian gas supplies is likely to exacerbate inflation in Germany, which hit a more than 40-year high in March. Consumer prices rose 7.3% year-on-year, according to data from the German Federal Statistics Office. The main culprit is the price of natural gas and oil prices skyrocketed, up nearly 40% over the same period.

BDEW, Germany’s association of energy and utility suppliers, last week said it was “ready to draw up a detailed plan” to phase out Russian gas quickly, but called on politicians to move forward. act with caution.

Marie-Luise Wolff, President of BDEW said: “After all, cutting Russian gas no different from the transformation of the entire German industry”.