Germany would enter recession with Russian energy embargo

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© Reuters. FILE PHOTO: Germany’s Economics and Climate Action Minister Robert Habeck gestures during a news conference on measures to reduce carbon dioxide emissions and dependence on the Germany towards Russian energy imports, amid Russian invasion of Ukraine, in Berlin, Germany

BERLIN (Reuters) – The German government’s downbeat forecast of 2.2% growth this year does not assume a Russian energy embargo or blockade and the economy would tip into recession if either anything else was happening, Economy Minister Robert Habeck said on Wednesday.

Habeck’s ministry on Wednesday cut its 2022 growth forecast to 2.2% from 3.6% projected in January, as Russia’s invasion of Ukraine, sanctions and high energy prices weigh on output . It also raised its inflation forecast for 2022 to 6.1%.

Germany’s support for Ukraine and sanctions on Russia have led to weaker growth and higher inflation forecasts, Habeck told a press conference: “We have to be ready to pay this price”.

“Ukraine is fighting for its freedom, its democracy, its form of government and its territorial independence. But they are also fighting for us – for Germany, for Europe, for the principles on which this order of peace is , or was built,” he added. mentioned.

An economy ministry official said an escalation in the gas situation with Russia would reduce growth in Europe’s biggest economy by 0.5 to 5.6 percentage points, depending on the scenario.

Russia’s Gazprom (MCX:) cut off gas supplies to Poland and Bulgaria on Wednesday over their non-payment in roubles, sparking an economic war with Europe in response to Western sanctions imposed over the invasion of Ukraine via Moscow.

Habeck said that Germany takes this situation very seriously but that German companies will continue to pay for Russian gas in euros, respecting the contracts.

Germany’s dependence on Russian gas has fallen to 35% of imports from 55% before the war in Ukraine, he added.

Asked whether Germany might consider expropriating a refinery in Schwedt operated by Russian state-owned Rosneft, which accounts for all of Germany’s remaining Russian oil imports, Habeck said: “We are in a situation where the German government has to adapt and prepare for all scenarios… What is conceivable, we think about and prepare for politically.”

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