In the event of such a shock, the country would lose 220 billion euros ($238 billion) in output over the next two years, according to a report by five German economic institutions. Germany’s GDP will grow by just 1.9% in 2022 and contract by 2.2% in 2023. This year, growth will be 2.7% if gas continues to flow.
Cuts in Russian gas will lead to a “sharp recession” in Europe’s largest economy, said Stefan Coots, director of research at the Kiel Institute for the World Economy and one of the report’s authors.
But a ban on Russian gas in the near future will hurt Germany, which received about 46% of its natural gas from Russia in 2020, according to the International Energy Agency. It uses the fuel to heat its homes, generate electricity, and power its factories.
German Finance Minister Christian Lindner said last week that the country was moving “as quickly as possible” to phase out Russian energy, but criticized the sudden shutdown.
“The question is, at what point are we hurting Putin more than ourselves?” Lindner stated this in an interview with Die Zeit newspaper.
“If only I could follow my heart, there would be an immediate embargo on everything. However, it is doubtful that this will stop the war machine in the short term,” he added.
The main culprit: rising prices for natural gas and oil, which have risen nearly 40% over the same period.
BDEW, an association of German energy and utility suppliers, said last week it was “ready to develop a detailed plan” for a quick phase-out of Russian gas, but urged policymakers to proceed with caution.
“After all, [cutting Russian gas] it is nothing short of a transformation of the entire German industry,” said Marie-Louise Wolff, President of BDEW.
— Chris Liakos contributed reporting.