Germany will “become poorer” because of Russia’s attack on Ukraine, the government’s economics minister has warned, as rising energy prices fuel record inflation and threaten to push Europe’s biggest economy into recession.
“It is not possible for this to end without cost to German society, it is unthinkable,” Robert Habeck told public broadcaster ZDF on Wednesday. “I believe we are ready to pay this price which is small enough compared to the sufferings in Ukraine.”
Preliminary data indicate that inflation reached 7.3% in March, according to the country’s Federal Bureau of Statistics. This is the highest level in over 40 years.
The main culprit: the soaring prices of natural gas and oil, which are up nearly 40% over the previous year.
Rising energy prices were a problem months before Russia invaded Ukraine, but the war – and fears it will lead to a supply crisis in Europe – has pushed prices even higher. This is a particular concern for Germany, Russia’s biggest energy customer in Europe.
The German government indicated on Wednesday that a payments dispute with Russia – which has required “hostile” nations to pay in rubles for their natural gas rather than euros or US dollars declared in contracts – could lead to shortages and ultimately to rationing.
“The high dependence on Russian energy supplies implies a considerable risk of lower economic output and even a recession with significantly higher inflation rates,” the German Council of Economic Experts said in a statement on Wednesday.
“Germany must immediately do everything possible to take precautions against the suspension of Russian energy supplies and quickly end its dependence on Russian energy sources.”
The council cut its GDP growth forecast this year to 1.8% from 4.6% in December, citing inflationary forces and supply chain disruptions caused by the war in Ukraine.
The European Central Bank has so far delayed raising interest rates, unlike its peers in the US and UK, which have moved to tame inflation in recent weeks.
— Inke Kappeler and Mark Thompson contributed reporting.
Source: CNN Brasil
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