Tobias Schwarz Afp | Getty Images Germany’s heavy reliance on Russian energy could lead to a recession, an independent think tank warned on Wednesday. There are growing concerns about what Russia’s unprovoked invasion of Ukraine will mean for European economies. The war has contributed to higher energy prices, it is also raising food prices and there are additional costs to deal with a massive influx of Ukrainians leaving the war. There is also the continuing threat that Moscow may choose to cut its gas supplies to the bloc – which could mean the collapse of many businesses. “High dependence on Russian energy supply poses a significant risk of lower economic output and even recession with significantly higher inflation rates,” the German Council of Economic Experts, which advises the government in Berlin, said in a report on Wednesday. German Chancellor Olaf Soltz expressed similar concern last week, speaking in parliament, saying that imposing an immediate ban on energy imports from Russia “would mean that our country and the whole of Europe would sink into recession.” His comments highlighted the dependence of Germany and other EU countries on Russia for energy supply. In 2020, for example, Germany imported almost 59% of its natural gas from Russia, according to data from the European Statistical Office. Other EU countries were even more dependent on the Czech Republic importing 86% of Russian gas and Latvia and Hungary importing more than 100% – meaning they were buying more than their domestic needs. Germany should immediately do everything possible to take precautions against the suspension of Russian energy supply. German Council of Economic Experts Earlier Wednesday, German Economy Minister Robert Habeck issued a first warning, of three possible levels, for gas reserves. He urged businesses and households to reduce energy consumption, saying “every kilowatt hour counts”, according to Reuters. Energy dependence has become even more worrying for Europe after Russian President Vladimir Putin said last week that “unfriendly” nations would have to pay for gas in rubles. This plan will support the Russian currency, which has fallen sharply after the invasion of Ukraine. Putin has previously set March 31 as the deadline for the ruble payments. However, Western countries, including Germany, have said this would be a breach of contract and urged businesses to continue paying in euros or US dollars. Division increases the chances of power outages. “Germany must do everything possible immediately to take precautions against the suspension of Russian energy supplies and to end its dependence on Russian energy sources quickly,” the German Council of Economic Experts said on Wednesday. The academy forecast a gross domestic product rate of 1.8% this year and 3.6% in 2023 for Germany – provided there is no suspension of energy deliveries. In terms of inflation, its estimates point to 6.1% this year and 3.4% in 2023 for Europe’s largest economy. Speaking on Wednesday, European Central Bank President Christine Lagarde said the war in Ukraine “poses significant risks to growth” and added that European households “are becoming more pessimistic and could cut spending”.
