Sudden Russian gas embargo would inflict new crisis on German economy, study says – Reuters

A model of the natural gas pipeline is placed on Russian Rouble banknotes in this illustration taken, March 23, 2022. REUTERS/Dado Ruvic/Illustration
BERLIN, May 9 (Reuters) – An abrupt stop in deliveries of Russian natural gas could trigger a recession in Germany comparable with the economic crisis years of 2020 and 2009, if not worse, according to a study released on Tuesday.
Such an embargo, whether triggered by the European Union or Russia, would lead to a fall in production in the first 12 months of between 114 billion euros ($120 billion) and 286 billion euros, corresponding to about 3%-8% of gross domestic product (GDP), the IMK institute said.
The study by economist Tom Krebs also said economic output in Europe's largest economy could fall by a further 2-4% as a result of sagging demand due to high energy prices.
A sudden gas embargo could trigger a recession similar to that seen in the first year of the pandemic or the financial crisis of 2009, Krebs warned. It "could also lead to an economic crisis the likes of which (West) Germany has not seen since World War Two," he said.
The University of Mannheim economist found six German industries to be particularly reliant on natural gas: chemicals, in particular basic chemicals; metal production and processing, as well as foundry, glass and ceramics; food; paper; mechanical engineering and vehicle manufacturing.
"For these industrial sectors, natural gas is an essential input factor in the production process and it is difficult to replace," Krebs said.
($1 = 0.9521 euros)
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