THE German business climate worsened this month, a key survey published today showed, as Europe’s largest economy faced up to a possible Russian gas stop.

The closely watched index fell to 92.3 from 93 in May, after rising for the last two months, according to the Ifo think tank.

Managers were “markedly more pessimistic” about the outlook for Germany, said Ifo president, Clemens Fuest.

Their surveyed expectations of future economic conditions fell to 85.8 this month from 86.9 in May.

“Rising energy prices and the threat of gas shortages are of great concern to German business,” Fuest said.

Yesterday, Germany raised the alert level under its emergency gas plan after Russian energy giant Gazprom slowed deliveries.

Flows of gas via the Nord Stream pipeline, which runs from Russia to Germany under the Baltic Sea, were cut by 60% last week.

Germany is highly reliant on Russian energy imports to meet its needs, especially for gas.

The fuel is used for electricity generation, heating homes and powering industrial production.

A complete stop to supplies threatens heavy consequences for Europe’s largest economy.

Flatlining growth and high inflation pushed by energy prices were the “base case” for the rest of the year, with a recession a “risk”, said Carsten Brzeski, head of macro at the bank ING.

Energy worries were piled on top of the war in Ukraine and further supply chain disruptions caused by coronavirus lockdowns in China, Brzeski said.

German companies’ assessment of the current economic situation fell slightly to 99.3 this month from 99.6 in May, according to the Ifo survey. – AFP, June 24, 2022.