The topic was remembered as “the great German gas debate”. On March 7, 2022, a few days after the Russian attack on Ukraine, nine renowned economists, including Moritz Schularick, President of the Kiel Institute for the World Economy, published an impact study entitled “What yew?” The economic effects of a stop to energy imports Russia for Germany. It is a scenario that Berlin has so far radically rejected: an immediate embargo on Russian gas. The authors consider the effects on the German economy to be “manageable”.
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At that time, Germany was more than dependent 50% from Moscow for its delivery. Several economists who belong to institutes close to employers or trade unions have already warned of sanctions against Russian gas: They expect a recession of up to 12 percent in the event of an interruption in deliveries and cascading effects on the entire industry. But the authors of “What if?” » come to the opposite conclusion: in their opinion, the adaptability of industry and households is much more important than previously thought. The recession would be only 1 to 3% and Russia’s energy weapons would be significantly weakened.
The article sparks an argument of rare intensity. The head of the chemical company BASF, Martin Brudermüller, is personally involved and warns in the press that such a measure would plunge the German economy “into its greatest crisis since the end of the Second World War.” Chancellor Olaf Scholz himself publicly discredited the authors of the study. We know the rest: the embargo is not decided, but a few months later Russian gas supplies are reduced by Russia itself before they are finally interrupted by the explosion of Nord Stream 1 and 2.
Effective measures
However, the feared shock did not materialize. Without Russian gas, Germany would certainly enter a recession in 2023, but the impact remained relatively moderate. The industry quickly found a replacement for gas. BASF itself imported ammonia from one of its factories in the USA. Households have reduced heating. And politicians have taken effective measures to limit the rise in prices and consumption.
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In an article published at the end of September, certain authors of “What if?” » came back to that moment. They draw conclusions about political decision-making in times of crisis and emphasize the strong influence of the German model of “close coordination between government, professional associations and unions”. And further: “The theoretical and empirical considerations of economists were considered to be much less relevant than the judgments of business leaders.” »
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