The Vereinigung des Bayerischen Wirtschaft (VBW), an association of Bavarian industrial associations, has published a study should there be a total Russian gas embargo, the German national output will collapse by 12.7%. The executive summary of the study says that, “In addition to the sectors directly affected by a supply disruption, all other sectors of the German economy also suffer tangible losses in value added indirectly. Consequently, supply disruptions spill over into the economy as a whole. The upstream and downstream effects are three times higher than the direct effects, accounting for 9.4% of total economic value added.
“This is the reason why substantial losses would also be recorded in the service sector or in agriculture. In total, the negative effects in our scenario amount to 12.7% of German economic output.
“A loss of value added on the scale described here would also affect a significant proportion of the workforce in Germany. In total, around 5.6 million jobs depend directly, upstream or downstream, on the value added lost due to supply disruptions. However, the calculated employment effect is purely arithmetical. Due to short-time work arrangements, other employment opportunities for employees, etc., these employees would not (directly) fall into unemployment. Overall economic costs due to de facto underemployment nevertheless arise.”
The German government fears that Russia will use maintenance works scheduled on the Nord Stream 1 pipeline for July 10, to turn off gas flows completely and not resume them. In view of that threat, the government has established alert level two, one step before rationalization. (https://www.vbw-bayern.de/Redaktion/Frei-zugaengliche-Medien/Abteilungen-GS/Wirtschaftspolitik/2022/Downloads/vbw_Studie_Folgen_Lieferunterbrechung_von_russischem_Erdgas_Juni_2022.pdf)
