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Ukraine conflict cost Germany over 200BN euros – expert

Following the start of hostilities, Berlin replaced Russian gas with costlier alternatives, with the industry bearing the brunt

Germany has lost more than 200 billion euros ($216 billion) since the start of the Ukraine conflict nearly two years ago, the president of the German Institute for Economic Research, Marcel Fratzscher, has estimated. The expert told Die Rheinische Post that rising energy prices have been among the main contributing factors.

For years, Germany’s prized industrial sector had been fueled by relatively inexpensive Russian gas. However, after Russia launched its offensive against Ukraine, the government in Berlin decided to forgo Moscow’s energy, switching to costlier alternatives from a number of sources, including American liquefied natural gas.

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In its article on Wednesday, Die Rheinische Post quoted Fratzscher as saying that the “economic costs for Germany after two years of the Ukraine war lie distinctly above 200 billion euros.” He clarified that in 2022, growth was down by 2.5%, translating into approximately 100 billion euros in losses, with the German economy shrinking to a comparable extent in 2023.

According to Fratzscher, accelerating inflation in Germany has hit low-income workers particularly bad.

The newspaper pointed out that another entity, the German Economic Institute, had arrived at a similar conclusion in its unreleased report. Experts put the loss from the combined negative effect that the Covid-19 pandemic and the Ukraine conflict have had on the German economy at 240 billion euros in 2022-2023.

The researchers also cited misguided policies adopted by the German government during this period, particularly the decision to phase out nuclear energy production.

The German Economic Institute reportedly wrote that the country’s entire economy has been affected by the Ukraine conflict, singling out the chemical, paper and metal industries as among the hardest hit. The only apparent winners of the current situation are defense contractors, a report cited by Die Rheinische Post suggested.

On Monday, Germany’s central bank assessed that the country’s economy may contract further in the first quarter of 2024, with no recovery in sight.

“With the second consecutive decline in economic output, the German economy would be in a technical recession,” the Bundesbank stated, referring to the final quarter of 2023, when the country’s GDP shrank 0.3% in annual terms.

Earlier, the DIHK chambers of industry and commerce revealed the findings of a poll conducted among more than 27,000 German companies. According to the survey, the majority of businesses also expect the economy to contract 0.5% this year. 

Commenting on forecasts predicting 0.2% growth this year, German Economy Minister Robert Habeck acknowledged last week that the outlook is “dramatically bad.”

Finance Minister Christian Lindner, in turn, noted that the situation is “embarrassing and dangerous in social terms.”

February 21, 2024 at 08:53PM
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