The country would lose 220 billion euros ($238 billion) in economic output over the next two years in the event of such a shock, according to a report by five German economic institutes. German GDP would rise by just 1.9% in 2022, and contract by 2.2% in 2023. Growth would be 2.7% this year if the gas keeps flowing.
Cutting Russian gas would push Europe’s largest economy into a “sharp recession,” said Stefan Kooths, research director at the Kiel Institute for the World Economy and one of the report’s authors.
But a ban on Russian gas in the near term would wreak havoc on Germany, which relied on Russia for about 46% of its natural gas in 2020, according to the International Energy Agency. It uses the fuel to heat homes, generate electricity and help power its factories.
Last week, Germany’s Finance Minister Christian Lindner said the country was moving “as quickly as possible” to ditch Russian energy, but poured cold water on a sudden stop.
“The question is, at what point do we do more harm to Putin than to ourselves?” Lindner said in an interview with newspaper Die Zeit.
“If I could only follow my heart, there would be an immediate embargo on everything. However, it is doubtful that this would stop the war machine in the short term,” he added.
The main culprit: Soaring prices for natural gas and oil, which rose by nearly 40% over the same period.
BDEW, an association of German energy and utility suppliers, said last week that it was “ready to work out a detailed plan” to phase out Russian gas quickly, but urged politicians to proceed with caution.
“After all, [cutting Russian gas] is about nothing less than the transformation of the entire German industry,” Marie-Luise Wolff, BDEW’s president said in a statement.
† Chris Liakos contributed reporting.