The Institute for Macroeconomics and Business Cycle Research (IMK) warns of serious economic consequences of a gas supply stop.
The union-related institute, which is financed by the Hans Böckler Foundation, calculated various scenarios for this in a publication that appeared on Tuesday.
Assuming that energy costs will rise sharply, there will be "a peak decline in gross domestic product of more than 4 percent compared to the baseline scenario," according to the analysis.
In another scenario, in which energy costs rise even more as a result of a delivery stop, there is a “decline in gross domestic product of more than 6 percent for 2022.”
Johannes Pennekamp
Responsible editor for economic reporting, responsible for "The Lounge".
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In principle, an energy embargo is of course a political decision that involves numerous considerations.
"But we want to point out that the economic and social consequences would most likely be serious and that economic policy must be ready to react accordingly," said IMK Director Sebastian Dullien.
In view of the economic risks, he advocates reducing dependency on energy supplies from Russia resolutely and as quickly as possible - but not imposing an embargo in the short term.
The warning comes a day after chemical union IG BCE warned that hundreds of thousands of jobs would be lost if Russian gas supplies ended abruptly.
The authors of the new scenarios emphatically point out that the figures, which they calculated using the recognized "NiGEM" economic model, are subject to enormous uncertainty.
Stopping Russian energy supplies to Germany would be an absolute novelty for the German economy.
According to the analysis, the diverse impact channels are only partially represented in current economic models and – depending on the model – to a varying extent.
"However, this applies even more to other model calculations, which only suggested moderate effects and whose results have recently been discussed in public," claims Dullien.
Controversy over the models
The researcher is alluding to an analysis of several renowned economists, including the economic historian Moritz Schularick and the American economist Rüdiger Bachmann.
In a model calculation, they also put the short-term damage of an embargo at a maximum of 3 percent of economic output, while the long-term damage was only 0.2 percent.
That would be far less than the slump as a result of the corona pandemic.
The IMK criticizes that the model used by colleagues neglects "many of those channels that we know were central to the depth and duration of the slump in economic activity in past crises".
The IMK authors cite the role of the financial markets as an example.
The model they use also has blind spots.
The question of how severe the economic damage of an abrupt halt to the supply of Russian energy raw materials would be has been the subject of bitter discussions among German economists for days.
The researchers, who only fear moderate consequences, faced opposition, most recently from Chancellor Olaf Scholz (SPD), who publicly described it as “irresponsible” to calculate “any mathematical models that then don’t work”, but also from other individual economists.
In addition to Monika Schnitzer, who is a member of the Federal Government's Advisory Council, researchers close to the trade union and the SPD in particular expect serious consequences.
Christian Bayer, economist at the University of Bonn and one of the authors of the more moderate forecast, defended his own calculations in the FAZ on Monday.
He replied to the Chancellor:
The research institute also lowered its growth forecast for the current year on Tuesday.
In a basic scenario in which energy prices do not continue to rise exorbitantly, the researchers expect gross domestic product (GDP) to grow by 2.1 percent in 2022.
If energy prices were much higher, the German economy would "shrink by 0.3 percent on an annual average" this year.
In the previous economic forecast from December, the IMK had still assumed economic growth of 4.5 percent for 2022.