That’s the biggest drop since officials began keeping records in 1994. Germany’s economy is in dire straits. Rising inflation has checked people’s spending power, while a looming energy crisis threatens to push the country into recession. Last week, official data showed the country stagnated in the second quarter. While the European Union’s economy unexpectedly grew by 4% in the second quarter compared with last year, a slowdown in Germany – the heart of manufacturing – could help turn it around. The country accounts for around a quarter of the EU’s gross domestic product. And the ongoing energy standoff between Europe and Russia means a recession is still very much on the cards. Germany is particularly vulnerable. It has long relied on Moscow’s natural gas exports to power its homes and heavy industry. While Germany has managed to reduce Russia’s share of its natural gas imports to 35% from 55% before the war in Ukraine began, a sudden stop could wipe 220 billion euros ($226 billion) from its economy in next two years, according to five of the country’s leading financial institutions. This is a very real possibility. Russia has already turned off the taps in many European countries and energy companies in recent months. Over the weekend, Moscow cut off supplies to Latvia for “violation of gas withdrawal conditions,” without elaborating. Anticipating the worst, Germany has already activated the second phase of its three-stage gas emergency plan, bringing it one step closer to cutting supplies to industry — a move that would deal a major blow to its economy and, by extension, , throughout Europe. — Nadine Schmidt and Mark Thompson contributed reporting.
