Sudden Russian gas embargo would inflict further crisis on German economy, study finds

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A model of the gas pipeline is placed on Russian ruble banknotes in this illustration taken March 23, 2022. REUTERS/Dado Ruvic/Illustration

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BERLIN, May 9 (Reuters) – A sudden halt in Russian natural gas supplies could trigger a recession in Germany comparable to the economic crisis years of 2020 and 2009, or even worse, according to a study published on Tuesday.

Such an embargo, whether triggered by the European Union or Russia, would result in lower production in the first 12 months of between €114 billion ($120 billion) and €286 billion, which corresponds to approximately 3 to 8% of the gross domestic product. product (GDP), indicated the institute IMK.

The study by economist Tom Krebs also indicates that economic output in Europe’s largest economy could fall by a further 2-4% due to falling demand from high energy prices.

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A sudden gas embargo could trigger a recession similar to that seen in the first year of the pandemic or the 2009 financial crisis, Krebs warned. It “could also lead to an economic crisis the likes of which (West) Germany has not experienced since World War II,” he said.

The University of Mannheim economist found that six German industries were particularly dependent on natural gas: chemicals, especially basic chemicals; production and processing of metals, as well as foundry, glass and ceramics; food; paper; mechanical engineering and vehicle manufacturing.

“For these industrial sectors, natural gas is a critical input factor into the production process and it is difficult to replace it,” Krebs said.

($1 = 0.9521 euros)

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Reporting by Rachel More; edited by David Evans

Our standards: The Thomson Reuters Trust Principles.

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