Quoting several high-ranking banking officials, Bloomberg reported that financial institutions in the European nation are expected to put aside extra funds. This, it added, sought to tackle a potential spike in defaults in the event that Russia completely cuts off supplies of natural gas.
Lutz Diederichs, CEO of BNP Paribas Germany, said Europe's largest economy is projected to fall into a recession. He told media outlets that lenders will be required to bolster corporate loans with more capital. The remarks by Diederichs echoed those by Bettina Orlopp, CFO of Commerzbank, during her interview with the German weekly magazine Focus Money.
Meanwhile, Deutsche Bank CEO Christian Sewing warned that a complete loss of access to natural gas from the Nord Stream pipeline would force "a deep recession" that would hit the German economy hard. Germany is highly dependent on energy imports from Russia, but the Russia-Ukraine war and the West's sanctions against Moscow put this deal in a precarious situation.
The banking executives reportedly expressed concern about scheduled maintenance at the Nord Stream pipeline, which supplies gas from Russia to Germany. Russian state-owned gas firm Gazprom, which operates the pipeline, said both strings of the pipeline will be non-operational from July 11 to 21 due to annual repair works. The operator added that the shutdown was previously agreed to by all parties.
Nevertheless, several officials in the European Union have cast doubt as to when the supply of natural gas via the pipeline will resume.
German Vice Chancellor Robert Habeck earlier warned that the country could experience a collapse similar to the one in 2008 if the problem is not addressed.
"Companies would have to stop production [and] lay off their workers. Supply chains would collapse. People would go into debt to pay their heating bills, [and those] people would become poorer," he said.
Habeck, who also serves as Germany's economic affairs and climate action minister, said there could be "a kind of Lehman Brothers effect in the energy market – and then a domino effect that would lead to a severe recession." (Related: Germany's economic minister warns of catastrophic economic collapse stemming from energy shortage.)
The head of Germany's Federal Network Agency (BNetzA) – which regulates electricity and gas usage – called on the rest of the population to reduce their energy consumption in order to minimize the impact of a possible supply cut.
BNetzA President Klaus Müller said on June 22: "Everyone in industry and in their home life can contribute to this. This also includes jumpers, shower heads, turning the heating down a bit. All of these help." He also warned that consumers are set to see a two- to three-fold increase in their gas bills in the coming months.
A day before, Müller predicted that Germany could only live off of its gas reserves for less than three months without gas from the Nord Stream pipeline over the winter.
"If the storage facilities in Germany were mathematically 100 percent full, we could do without Russian gas completely for just about two-and-a-half months, and then the storage tanks will be empty," he said.
The looming cuts in natural gas supply, paired with Germany's over-reliance on "green energy" from renewable sources, has put the country between a rock and a hard place.
In a bid to alleviate its energy crunch, Germany has resorted to reactivating its coal-fired power plants. Its fellow European countries – the Netherlands, Austria and Italy – have also announced plans to restart their fossil fuel plants in case Russia completely shuts off gas flows.
EnergySupply.news has more stories about Germany's scramble for energy supplies.
Watch this World Is One News report discussing if Europe can find alternatives to Russian oil and natural gas.
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