Germany risks 180 billion euros by abandoning Russian oil

Mr Scholz remained firm on his opposition to a ban on Russian gas on Friday, saying it would cause a “dramatic economic crisis” in Europe and millions of job losses without ending the war.

The Bundesbank said a ban would “significantly weaken” the German economy and lead to power rationing, leading to a €180bn (£151bn) loss in output compared to March forecasts.

The central bank added that this would trigger a recession, although the fall in GDP would be less pronounced than during the financial crisis and the pandemic.

The IMF said the war was inflicting a ‘serious setback’ to Europe’s recovery, warning that high gas prices would disproportionately affect Germany, Italy and Hungary given their dependence on Russian imports .

Its analysts said: “Some of Europe’s largest economies, such as France, Germany and Italy, forecast very weak or negative quarterly growth in mid-2022.

“This reversal of the recovery is hidden in the annual growth projections of these economies due to a significant carry-over from 2021.”

The Fund gave Germany the steepest downgrade of any major economy except Russia in a grim forecast updated earlier this week.

He expects the German economy to grow 2.1% this year despite a negative start to the year, in forecasts that assume there will be no petrol ban. The prediction was 1.7 percentage points lower than its January forecast, while Italy is also expected to be hit hard. Growth in Italy is expected to slow significantly, from 6.6% in 2021 to 2.3% this year.

Both countries are heavily dependent on Russian gas, but also have oversized manufacturing sectors that are feeling the brunt of rising energy prices.