Germany’s economy would be hurt by Ukraine’s invasion of Russia | World | News

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With Europe’s powerhouse at the center of a major stalemate surrounding diplomacy to find a solution to the tension, Berlin can ill afford a war-triggered fuel price hike. For one analyst, the fact that the deadline set by the United States for the outbreak of a conflict has passed, the current conditions seem to maintain a country already suffering from record inflation rates.

When discussing the crisis, expert Jörg Forbrig explained to WiWo why a war would be detrimental to the German economy.

He said: “Because a Russian invasion would probably also cause considerable economic distortions in Germany.

“IFO Chairman Clemens Fuest has now warned of an oil and gas price shock in the event of an invasion – even if gas supplies were not limited there would be a shock prices, at least temporarily.”

Speaking of the impact, he added: “It would also affect private households and industry in Germany.”

So far, the Ifo Institute expects inflation to hit 4% this year – which alone would be the highest rate since 1993 and significantly higher than the 3.1% rate in 2021.

Mr Fuest said: ‘If a war breaks out, it could be even higher.

At the same time, consumer prices in Germany have already risen 4.9% in January without any invasion.

Measured by the Harmonized Index of Consumer Prices (HICP), the measure of inflation on which the European Central Bank (ECB) bases its monetary policy, consumer prices in this country even climbed by 5.1 %.

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The potential rise in fuel prices would not only affect Germany, but would have a wider impact on the whole of Europe, including Britain.

The threatened dismantling of the Nord-Stream II gas pipeline will not only cost the Russian oligarchs dearly, but will also see much-needed supplies fail to reach European markets.

Germany is by far the most important sales market for Russian gas.

The alternative pipeline gas comes from Norway, but Oslo already increased deliveries in October.

There is probably “virtually no more short-term upside potential,” according to Commerzbank analysts.

Norwegian production has stagnated for many years.

In the event of a Russian supply freeze, German gas stocks would provide some buffer, but that would only last until April, analysts warn.

In any case, it would become much more expensive.

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Many energy experts have canvassed the idea of ​​obtaining liquefied natural gas from other countries.

The United States and Qatar have both been considered, however, transporting and storing these assets requires very complicated and expensive resources.

Currently, much of the gas pumped into Europe from Russia and the Middle East passes through Ukraine in the process.

Last year, gas delivered to Europe through Ukrainian pipelines fell by 25% and fears of further disruptions have intensified as Russian troops build up near the Ukrainian border.

Moscow denies Western claims that it plans to invade Ukraine. But if the crisis erupts, there are few alternatives to fill the void should Russian gas supplies to Europe be interrupted.

For Germany, the end user will feel the pinch, but according to Fuest, consumers in Europe’s biggest economy are still willing to spend money.
He concluded by saying, “Private households have accumulated considerable savings which they would like to spend, despite rising energy prices.”

Additional reporting by Monika Pallenberg

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