Germany blames Putin over economic chaos as recession looms

Polish reporter says France and Germany 'two faced' over Russia

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Unveiling the government’s latest economic forecasts, Robert Habeck told a news conference that the contraction in Germany’s economy, though serious, was less than many experts had expected would be the result of a cut to Russian gas supplies, thanks to the measures Berlin had taken to protect the economy.

Blaming Moscow for the looming recession, he said: “We mustn’t let [Russian president Vladimir] Putin win with his strategy of endangering our economic prosperity.”

Defending his government’s €200bn “protective shield” financed by new borrowing, he claimed that the downturn “could have been worse if the government hadn’t acted”. He added the many relief measures “had succeeded in stabilising the economy”.

“If you recall, economists at the start of the year said that if Russia stopped supplying gas then the economy would shrink by 3 to 9 percent,” Mr Habeck said. “The measures we’ve taken have gained us time, and they’ve worked.”

Germany’s planned heavy spending to shield its citizens from the full impact of rising energy prices has also caused unease among some countries in the 27-nation EU that say it is more than poorer members can afford.

Germany suggested EU states could use money from the €800 billion “Next Generation” pandemic recovery fund to help tackle crises such as the energy crisis, a government spokesperson said on Tuesday.

Chancellor Olaf Scholz said the country could not expect energy deliveries from Russia for the foreseeable future but that the situation could be managed.

“If we all continue to adapt to the changed situation – the citizens, the companies and the politicians – then we will get safely through this winter,” Mr Scholz told an engineering conference.

There have already been signs of demand picking up in Germany on cooler days despite the need to curb consumption.

Across Europe, analysts have put the gas shortfall at almost 15 percent of average demand in winter and said Germany needs to cut energy consumption by around a fifth, with worrying implications for Europe’s biggest economy whose industry has relied on abundant, affordable energy supplies.

The energy crisis has had knock-on effects across Europe as businesses have passed on extra costs and consumers have less to spend.

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Industry forecaster S&P Global Mobility said that, in a worst case scenario, Europe’s energy crisis could cut its car production by close to 40 percent or more than 1 million vehicles, per quarter through the end of 2023. The auto industry is widely regarded as a gauge of economic health.

Rather than splashing out on new cars, market research released on Tuesday showed Britons are stocking up on electric blankets, candles and energy-efficient slow cookers to try cut fuel bills and prepare for any power outages.

And in Italy, Intesa Sanpaolo, the country’s biggest bank, is discussing with unions a four-day working week for its 74,000 local staff in part to curb energy use.

Mr Scholz said that Germany, which had relied more heavily than most European states on Russia gas and has been racing to find alternative sources, had almost hit a target of having its gas storage facilities 95 percent full before the onset of winter.

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Other European countries once dependent on Russia gas, such as Italy, have also been replenishing storage and sourcing supplies from other countries including Algeria and Azerbaijan.

Italy could however face a gas shortfall in the winter of 2023-24 without a new regasification terminal that is planned in Tuscany, the CEO of energy major Eni Claudio Descalzi said on Tuesday.

Russia progressively reduced gas flows through Nord Stream and also via other routes after Western sanctions in response to the Ukraine war that began in February.

Gas via Nord Stream stopped completely in September and any hope of resuming shipments to Germany through that route was dashed last month by suspected sabotage.

President Vladimir Putin said on Tuesday that Russia was not working against anyone on energy markets, a week after Washington criticised a decision by producer group OPEC+, of which Russia is a member, to steeply cut oil production.

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