Germany faces recession with Russia energy embargo
The German government's reduced forecast for 2.2 per cent growth this year does not assume a Russian energy embargo or blockade and the economy would tip into recession if either of those transpired, Economy Minister Robert Habeck said on Wednesday.
Habeck's ministry on Wednesday cut its growth forecast for 2022 to 2.2 per cent from 3.6 per cent projected in January as Russia's military operation in Ukraine, sanctions and high energy prices take a toll on output. It also raised its 2022 inflation forecast to 6.1 per cent.
Germany's support for Ukraine and sanctions against Russia resulted in the lower growth and higher inflation forecasts, Habeck said, telling a news conference: "We must be prepared to pay this price".
An economy ministry official said an escalation of the gas situation with Russia would reduce growth in Europe's largest economy by between 0.5 and 5.6 percentage points, depending on the scenario.
Russia's Gazprom halted gas supplies to Poland and Bulgaria on Wednesday over their failure to pay in roubles, cranking up an economic war with Europe in response to Western sanctions imposed for Moscow's military operation in Ukraine.
Habeck said Germany took this situation very seriously but that German companies would continue to pay for Russian gas in euros, respecting contracts.
Germany's dependency on Russian gas had dropped to 35 per cent of imports from 55 per cent before the war in Ukraine, he added.
Asked whether Germany could 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 must adapt to and prepare for all scenarios ... What is conceivable, we are thinking about and preparing politically."