The European Union ponders what steps to take next to up the pressure on Moscow, as the chief economist of S&P Global said a trade break between Russia and Germany could have triggered a financial shock on the German economy.
The one that would really move the macro needle is a trade break-up between Russia and Europe. Russia cutting off gas to Germany isn't the only way this would happen. Disruption to other Russian imports into Europe, like metals, would likely play a roll as well.
He told CNBC that a large financial shock would feed through to lower GDP, lower employment, and lower confidence.
Germany gets half of its natural gas from Russia, and is under pressure to ban it due to reports of Russian atrocities in the Ukraine war. Russian President Vladimir Putin has threatened to shut off supply to Europe if hostile countries don't pay in rubles for natural gas.
The EU gets 40% of its gas and 30% of its crude oil from Russia. The European Commission unveiled a plan last month to reduce the bloc's dependence on Russian gas by the end of the year. At the start of this month,Lithuania became the first EU country to completely ban Russian energy.
Russia's energy exports have not been affected by the sanctions imposed by the western nations. Both the US and the UK will ban Russian energy imports.
Germany does not have many alternatives to fulfill its needs. Christian Sewing, CEO ofDeutsche Bank, said that cutting off Russian energy would lead to a recession in Germany. Russia has supplied Germany with gas for over 50 years.
German banks are expecting the country's GDP growth to slow to 2% in 2022, due to the war in Ukraine.
All Rights Reserved © 2024
