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An immediate and complete ban on all Russian natural gas from Europe would cost Germany’s economy €165 billion, the Bundesbank, Germany’s central bank, warned.
Germany gets about 55 percent of its natural gas from Russia, a third of which is used by industry.
The bank assumed that German manufacturers would not be able to fully replace the gas for nine consecutive months.
In that situation, inflation—already at a near-record 7.3 percent—would rise 8.8 percent, the bank calculated.
Such a ban would shrink the German economy by 5 percentage points this year, the bank said, sparking a dramatic recession and sharpening the risk of stagflation.
The bank’s calculation is distinctly darker than those of academic economists.
Last month, a group of university economists said banning Russian gas would cost the nation’s economy anywhere from 0.3 to 3 percent but could be “manageable.”
Businesses were quick to disagree.
Martin Brudermüller, CEO of BASF, the world’s largest chemical company, said blockading Russian gas would destroy Germany’s “entire economy” and ignite the country’s worst economic crisis since World War Two.
German chancellor Olaf Scholz called the academic claim “irresponsible.”
Germany will end its purchases of Russia’s natural gas by the end of next year, according to a statement by finance minister Robert Habeck.
TREND FORECAST: Germany has no good options. If it stops accepting gas from Russia, it would be unable to replace most of it, causing an industrial and economic crash. If it continues to buy Russian gas, it helps to fund Russia’s war in Ukraine.
Germany will continue to buy Russia’s gas and the Western alliance will continue to permit it to do so. Meanwhile, Germany is enacting a detailed plan to end gas imports from Russia by the end of this decade.