Germany to Face Up to 10% Inflation due to Embargo on Russia

The German Institute for Economic Research (DIW) warns of inflation of up to 7 percent due to the war in Ukraine and up to 10 percent in the event of an embargo on Russian oil and gas.

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"If there is an oil and gas embargo or if President Vladimir Putin turns off the gas tap, inflation rates of up to 10 percent are possible," DIW President Marcel Fratzscher said, adding that even without that escalation, inflation rates of between 6 percent and 7 percent can be expected.

"Politicians must be honest with the people and say that if there is an embargo and there are no more oil and gas supplies, neither three Qatars nor the United Arab Emirates are good for us," he stressed.

If the Ukrainian conflict continues, the restriction in energy consumption will be the only sensible way to face the increase in prices in the next two years.

This implies actions such as "driving less, car-free Sundays, speed limit on the highway. We have to save significantly on heating. And there will be temporary closures in companies with high energy consumption. That is the truth," Fratzscher indicated.

The Germans, however, will not be the most affected by the war. According to the DIW president, the main victims will be those countries that depend on food imports.

"Food prices are going up. Russia and Ukraine export 30 percent of the world's wheat. Russia also exports potash fertilizer. A country like Egypt has to import all the wheat it consumes. If the price goes up by 30 percent, millions of people they will fall into poverty", he specified, stressing that "we have not yet seen the worst."