Europe’s largest economy will shrink due to rising inflation, energy shortages and disruption to global supply chains, warned Christian Sewing, CEO of Deutsche Bank AG.
We will no longer be able to avert a recession in Germany,” Sewing said in a speech in Frankfurt on Wednesday. “We believe our economy is resilient enough to weather this recession well, provided central banks act quickly and decisively now.”
The crisis sparked by Russia’s invasion of Ukraine reached new heights when Gazprom PJSC announced this month that it was indefinitely suspending gas supplies through its largest pipeline to Europe. The European Union is scrambling for ideas to prevent the gas crisis from turning into an economic meltdown, and energy ministers are slated for an emergency meeting in Brussels on Friday.
“The longer inflation remains high, the greater the burden and the greater the potential for social conflict,” Sewing said.
The European Central Bank is set to hike interest rates sharply at its meeting later this week, with economists expecting benchmark borrowing costs to rise by up to 75 basis points.
Sewing has previously said that a complete halt to Russian gas supplies would plunge Germany into recession. Several lenders, including Commerzbank AG, have said they will need to increase loan provisions under the scenario, although they expect government support to soften the blow.
Sewing said Wednesday that he expects loan defaults to spike at some point, although the lender doesn’t see them yet and doesn’t expect them to hurt profitability.
Sewing argued that the supply shortages and the energy crisis made it clear that Germany needed to limit its dependency on other countries. “We cannot allow ourselves to add another dependency – access to finance – to our current dependency on gas, raw materials and supply chains,” he said.
“We must not largely leave the playing field and thus access to the global capital markets to foreign banks,” he said.
To achieve that goal, European consolidation is needed, he said. “The above issues are not new, but they are becoming more pressing,” he said.
https://www.independent.ie/business/world/deutsche-bank-ceo-says-germany-heading-for-recession-41968174.html Deutsche Bank CEO says Germany is headed for recession