The energy-price shock and near-stagnation of the German economy

Germany's export-and-manufacturing-heavy economy was hit disproportionately hard after Russia's 2022 invasion of Ukraine curtailed the inexpensive Russian gas and oil supplies on which much of German industry had come to depend, pushing headline inflation above 5% and squeezing energy-intensive sectors such as chemicals and metals. Bundesbank President Joachim Nagel described the shock as throttling Germany's recovery from the pandemic just as the economy was trying to normalize, with the central bank's own projections at the time acknowledging a materially weaker growth path even as it judged a severe downturn avoidable given the economy's underlying resilience. By April 2023, Nagel was able to say the acute energy crisis was 'more or less solved' as gas storage filled and prices retreated from their 2022 peaks, crediting diversified import routes and demand restraint, though he also flagged that structural headwinds, including an aging workforce and lagging digital and energy infrastructure, meant the German economy's growth problems would outlast the energy shock itself. The episode marked a sharp break from Germany's relatively resilient post-2008 performance.