Putin's Natural-Gas Squeeze And Energy Inflation Brings Germany 'On The Cusp Of A Recession'

Putin's Natural-Gas Squeeze And Energy Inflation Brings Germany 'On The Cusp Of A Recession'

European Union member state Germany is "on the brink of a recession" as the country's business confidence has slumped to its lowest level since June 2020.

What Happened: The Business Climate Index monitored by a Munich-based think tank, Ifo Institute, fell to 88.6 in July, with the measure of business sentiment at 92.2 in June.

The threat of a gas shortage and high energy prices due Russia-Ukraine war is weighing on Europe's largest economy, according to Clemens Fuest, the president of the Ifo Institute.

"Companies are expecting business to become much more difficult in the coming months. They were also less satisfied with their current situation," Fuest said in a statement.

"Germany is on the cusp of a recession," he added.

See Also: Not All Gas: Vladimir Putin's Threat Forces EU To Brace For Russian Pipeline Shut-Off

The survey results came days after Russian President Vladimir Putin warned that gas flows from the key ​​Nord Stream 1 pipeline from Russia to Germany might fall to some 20% by next week.

On Monday, the Russian state gas giant Gazprom said it would be slashing natural-gas flows to Europe to 20% of Nord Stream 1's capacity from Wednesday. The country restarted the pipeline last Thursday after 10-day scheduled maintenance.

Gazprom said it was cutting natural-gas flows again this week due to an equipment issue. However, the German ministry said "there is no technical reason" for the reduction.

"The Ifo business climate index, like the purchasing managers' index, now clearly points to a downturn in the German economy," Jorge Kraemer, an economic analyst at Commerzbank, told Insider. "How bad it ends up, unfortunately, lies mainly in Putin's hands," he added.

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