Germany’s ‘recession’ likely to rise… Russia’s gas crisis deepens

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German Chancellor Olaf Scholz (left) and Russian President Vladimir Putin (right). 2022.02.21/News1 © AFP=News1 © News1 Reporter Minsu Kim

Germany’s gas supply from Russia is declining sharply, and if the supply is cut off completely, Germany is likely to fall into a recession, the Bundesverband der Deutschen Industrie (BDI) has warned.

According to Reuters, the German Industry Association on the 21st (local time) downgraded its forecast for Germany’s economic growth rate this year to 1.5%. Prior to February 24, when Russia invaded Ukraine, the previous forecast for growth was 3.5%.

Russia last week reduced the delivery volume of Nordstream 1 pipeline, which is connected by land with Germany, by 40%. For Germany, which has depended on Russia for 55% of its gas supply, it is bound to be a big shock. In response, the German government even announced an emergency restart policy for coal power plants on the weekend of the 19th.

Suspension of coal power generation is a major agenda led by the European Union (EU) led by Germany, and this shift in position is a significant change.

Germany has decided to completely suspend operation of coal power plants by 2038 during the previous Merkel administration, and the Green Party, a coalition partner of the new Scholz government that took power last year, has insisted on moving that time to 2030.

In the end, it is evaluated that it reflects the sense of crisis that the European economy is heading to a cliff as oil prices soar by breaking new records every day and inflation soars.

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German economy minister Robert Havek said the attack was part of Russian President Vladimir Putin’s plan to incite fear in the West.

The German government first activated the first stage of the early warning stage of the three-stage plan to respond to the gas supply crisis. The government plans to introduce a new gas auction system in the coming weeks to encourage manufacturers to voluntarily cut gas consumption.

German Chancellor Olaf Scholz said earlier that it was “too early to declare a state of emergency at level 3,” but said it was uncertain whether the current gas supply would make it through the winter.

Germany is not alone in the growing sense of crisis. An increasing number of countries, such as Austria, Denmark and the Netherlands, are operating the first stage of early warning.

At the EU level, Ursula von der Leyen wants to accelerate the plan to ‘increase renewable energy generation’ along with efforts to ‘diversify gas supply’, such as importing liquefied natural gas (LNG) offshore from Israel, Cyprus, and Egypt. The executive chairman said in an interview with the Financial Times (FT).

The standard gasoline price in Europe is currently around 126 euros per megathour (MWh), more stable than this year’s high of 335 euros, but it is more than 300% higher than the previous year, Reuters added.

sabi@news1.kr

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