London (Times Of Ocean)- The German economy would plunge into recession if its supply of Russian energy (natural gas) was abruptly interrupted, top economists warned on Wednesday.
German economic institutes estimate that the country would lose 220 billion euros ($238 billion) in economic output over the next two years if such a shock occurred. The German economy will grow by just 1.9% in 2022, and contract by 2.2% in 2023. If gas keeps flowing, growth would be 2.7% this year.
According to Stefan Kooths, research director at the Kiel Institute for the World Economy and one of the report’s authors, cutting Russian gas would send Europe’s largest economy into a “sharp recession.”
Atrocities committed in Bucha during the Russian occupation of Kiev’s suburb led the European Union to escalate sanctions and target Russia’s vast energy exports for the first time since the invasion of Ukraine.
All Russian coal imports will be phased out by EU leaders. An EU source told CNN Business that coal will be banned by August. Several EU officials have urged action against Russian gas and oil exports in the new, sixth round of sanctions.
The International Energy Agency estimates that Germany will use 46% of its natural gas from Russia in 2020 due to a ban on Russian gas in the near term. Fuel is used to heat homes, generate electricity, and power factories.
This year, the European Union hopes to reduce its imports of Russian gas by 66%, and to be entirely independent of Russian energy by 2027.
German Finance Minister Christian Lindner said last week that the country is trying to phase out Russian energy “as quickly as possible,” but poured cold water on a sudden halt.
“At what point do we harm ourselves more than Putin?” Lindner asked in an interview with Die Zeit.
“If I could only follow my heart, there would be an immediate embargo on everything, but that is unlikely to stop the war machine in the short term,” he said.
Russia’s gas supplies would likely worsen Germany’s inflation, which hit a record high last month. Data from the country’s Federal Statistics Office showed that consumer prices rose 7.3% from a year earlier.
Over the same period, natural gas and oil prices rose by nearly 40%.
Last week, BDEW, an association of German energy and utility companies, said it was prepared to develop a detailed plan to phase out Russian gas quickly, but urged politicians to exercise caution.
“Cutting Russian gas is nothing less than transforming the German economy,” Marie-Luise Wolff, BDEW’s president, said in a statement.