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ECONOMY

Russian gas stop promises ‘sharp recession’ for Germany

An immediate end to Russian energy imports would send Germany into "sharp recession" next year, the country's leading economic institutes said in a forecast published Wednesday.

Robots working on the bodywork of various car models.
Robots working on the bodywork of various car models. Photo: picture alliance/dpa | Daniel Josling

Germany, which is highly dependent on Russian gas for its energy needs, has so far resisted calls for a European boycott in response to the war in Ukraine.

Closing the taps in “mid-April” this year would limit growth to 1.9 percent in 2022 and push Germany into a recession in 2023, causing the economy to shrink by 2.2 percent, according to the forecast.

READ ALSO: Germany will limit impact of Ukraine war on job market, says minister

The impact of a boycott would “not be overcome” over the next two years, the institutes (DIW, Ifo, IfW Kiel, IWH and RWI) said in a joint statement.

Europe’s largest economy could yet suffer a “setback” at the end of 2023 into 2024, as demand for energy rises in the European winter, before “gradually” returning to growth.

Even without a boycott of Russian gas, the war in Ukraine is “slowing down” Germany’s recovery from the economic shock of the coronavirus pandemic, the institutes said.

The group slashed its forecast for growth in 2022 to 2.7 percent, from its previous estimate of 4.8 percent made in October last year.

READ ALSO: German inflation hits post-reunification high at 7.3 percent

At the same time, it raised its 2023 growth forecast to 3.1 percent from 1.9 percent, in a scenario where energy deliveries continue.

Before Moscow began its war in Ukraine, a third of Germany’s oil imports, 45 percent of its coal purchases and 55 percent of gas imports came from Russia.

The country has set about weaning itself off Russia energy imports, accelerating investments in renewables and building liquefied natural gas (LNG) gas terminals to diversify its supplies.

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BUSINESS

Germany’s BMW to put €1 billion into electric vehicles in Austria

German auto manufacturer BMW said on Monday it would invest "around one billion euros" in the production of electric vehicles at a plant in Austria from 2025.

Germany's BMW to put €1 billion into electric vehicles in Austria

Altogether, 600,000 units a year should roll off the line at the factory in Steyr under the investment plan, set to run until 2030, BMW said in a statement.

From 2025, BMW will “develop and produce the next generation of e-drives” at the Austrian site, BMW’s production chief Milan Nedeljkovic said.

The refurbishment of the plant will see two new production lines added and the location expanded by 60,000 square metres.

The new facilities would require €710 million in investment, while €230 million would be dedicated to boosting vehicle development at Steyr.

“Around half” the 4,400 employees at the site would be working on “e-mobility” by 2030, plant boss Alexander Susanek said.

The Bavarian manufacturer said it aimed to have two million electric vehicles on the road by 2025, promising 13 new electric models and a revamp of its Mini brand.

BMW has already said it will spend €400 million to upgrade its home factory in Munich to produce electric vehicles.

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