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Russia's gas supply stop: Association warns of an economic slump of 12.7 percent


Would a complete, immediate end to Russian gas supplies hit Germany harder than expected? This is indicated by a study commissioned by a business association that sees two sectors in particular under pressure.

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Inscription on the road cover above a gas pipe in a residential area

Photo: Julian Stratenschulte / dpa

How badly would a complete stop to Russian gas supplies hit Germany?

The opinions of many economic experts differ significantly on this.

Among other things, this has to do with the fact that it is difficult to calculate how quickly companies could adapt to a gas shortage, or whether, on the contrary, entire sectors would stand still and staff would be sent on short-time work or unemployment.

"A total of around 5.6 million jobs would be affected."

Bertram Brossardt, General Manager of the Association of Bavarian Business

An investigation commissioned by the Bavarian economy is now anticipating a gloomy scenario in the event of a complete and abrupt interruption in delivery.

Should Russian gas no longer be available in the second half of the year - i.e. from July onwards - Germany's economic output could collapse by 12.7 percent (the full study can be found here ).

This is the result of calculations by Prognos.

The institute carried out the calculations on behalf of the Bavarian Business Association (vbw).

Germany would "slide into a deep recession," said Prognos chief economist Michael Böhmer.

"Arithmetically, around 5.6 million jobs would be affected by the consequences," said Bertram Brossardt, Managing Director of vbw.

Glass industry would be hit the hardest

Böhmer said industry accounts for 36 percent of gas consumption in Germany.

Without Russian gas, only half of the energy source would be available.

To generate electricity, it could partially switch to other energies.

But gas is just as indispensable for the chemical industry as it is for the glass industry or the rolling mills in the steel industry.

Without paint, glass or steel, the automotive industry and many other sectors would be in trouble.

The damage would be greatest in the auto and food industries.

A large part of the missing products could be replaced by purchases abroad, but "in the end it spreads to the entire economy," said Böhmer.

The glass industry would be hit hardest in the scenario, with a drop in production of almost 50 percent, followed by pig iron processing (minus 34 percent).

According to Prognos, car production, which is so important for Germany, would shrink by 17 percent.

200 billion euros lost added value?

The study examined the consequences of a sudden Russian gas supply stop from July 1 to the end of December.

In contrast to some earlier studies, Prognos took a look at individual production processes and their importance for other sectors, emphasized Böhmer.

With strong efforts, a quarter of the gas consumption could be replaced or saved.

This also includes, for example, heating apartments a little less.

But the industry would have to reckon with a coverage gap of 50 percent as early as July.

"In total, there is a risk of a loss of value creation of 193 billion euros" in six months, said Brossardt and warned in preparation: "Putin can turn off the gas tap at any time."

In the short term, gas can be replaced by oil and coal to generate electricity.

The last three German nuclear power plants accounted for around 6 percent of electricity generation, and their lifetime could be extended.

In the long term, the ambitious expansion of all renewable energies will slow electricity prices and free one-sided dependencies in the energy sector, said Brossardt.

Other economists with much more moderate forecasts

In the past, other studies had come to the conclusion that the supply freeze would have a rather moderate impact on economic activity.

A team led by economist Rüdiger Bachmann put the losses at between 0.2 and 2.2 percent of gross domestic product (GDP).

The joint diagnosis of the leading economic research institutes estimated the consequences for the years 2022 and 2023 together at around 6.5 percent.

The Mannheim economist Tom Krebs, on the other hand, gave an estimate of between 3.2 and 8 percent of GDP.


Source: spiegel

All business articles on 2022-06-28

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