Geoffrey Smith 

Investing.com — Germany’s central bank has warned that an embargo on Russian energy purchases would take 5% of Germany’s anticipated GDP for this year. This could derail the post-COVID recovery, and push Europe’s biggest economy into severe recession.

According to Deutsche Bundesbank, total economic costs for Germany from the halt in Russian oil, gas and coal purchases could be 180 billion Euros. This estimate is far more than many leading economists of the private sector. 

This intervention provides a vital degree of support for beleaguered Chancellor Olaf Scholz who has repeatedly diluted sanctions at European Union level in order to punish Russia’s invasion of Ukraine.

Germany was importing over half its supply and about one-third its oil from Russia when the war began. Scholz refused to accept the proposals of the U.S., EU members from eastern Europe and other EU countries. This was based on the lack of an immediate alternative supply source for those supplies.

Also, the Bundesbank warned that inflation would skyrocket if it wasn’t possible to find alternative energy sources. This year’s Consumer Price Index was up 1.5% and next year’s by over 2 percentage points.