Bundesbank Warns Russian Energy Embargo Could See German GDP Fall 5%
2022.04.22 15:06
By Geoffrey Smith
Investing.com — Germany’s central bank warned Friday that a full embargo on Russian energy purchases could take 5% off Germany’s expected GDP this year, derailing the post-COVID recovery and tipping Europe’s largest economy back into a severe recession.
The Deutsche Bundesbank said total costs to the German economy from a halt to purchases of Russian oil, gas, and coal could cost 180 billion euros, a far higher estimate than those provided by many of the country’s leading private-sector economists.
Its intervention gives a crucial degree of support to beleaguered Chancellor Olaf Scholz, who has repeatedly watered down sanctions proposed at European Union level to punish Russia for its invasion of Ukraine.
At the start of the war, Germany was drawing over half of its natural gas supplies and around one-third of its oil supplies from Russia. Scholz’s refusal to go along with proposals – led by the U.S. and the EU’s members in eastern Europe – has been based on the fact that there is no immediate alternative to those supplies, especially for natural gas.
The Bundesbank also warned that the need to find replacement sources of energy would put a rocket under inflation, adding over 1.5% percentage points to this year’s consumer price index and over 2 percentage points to next year’s.
