Russian Sanctions Leading To Economic Contraction... In Germany?

Tyler Durden's picture

It is no secret that the gist of western thinking has been that sanctions against Russia would pressure its economy enough to force Putin to finally crawl to the negotiating table, tail between his legs, and beg for western forgiveness. Call it the law of unintended consequences striking once again, because while Russia's economy continues to hum along (if only for now, something that can't be said about Ukraine's) and has forced the Kremlin to seek a variety of deals with China to avoid western isolationism, one other country may have been crippled far faster than Russia: Germany.

As Germany's Bundesbank reported overnight, in its latest current monthly report that was widely ignored due to the blanket media coverage of events in the Ukraine, if not so much in Gaza, "Germany’s economy may have stagnated in 2Q."

Who is to blame? Why the ongoing Ukraine conflict of course, and more specifically, the western response to it. As Deutsche Welle reported, "the institution said in a monthly report released Monday that second-quarter growth in Germany had likely slipped due to turbulence in Ukraine and Iraq and a number of public holidays which led to shorter work weeks."

More from Bloomberg:

  • “Economic growth in Germany markedly lost momentum in the first two months of spring,” the Bundesbank says in its monthly report.
  • “Activity in the construction industry declined, as expected, from very high levels in the winter that were bolstered by mild weather"

Yes, in Germany the "winter weather" was actually a boost to the economy. Sure, why not.

  • Says manufacturing activity declined, partly due to geopolitical tensions and timing of public holidays
  • "Considering that the services industry probably kept expanding, seasonally and workday-adjusted gross domestic product in the second quarter may have remained at the level of the first quarter."

Incidentally, nothing the Bundesbank has said is new, considering both hard and survey data coming out of Germany in the past few months have been abysmal. Yet one wonders: if indeed it is the Western, or rather make that American, response to the Ukraine crisis that is pushing Germany into yet another recession, how long until none other than Merkel says "Genug."

If nothing else, it certainly provides some context about the topic of conversation of this World Cup picture taken one week ago.