The leading EU economic power, Germany, is set to face contraction. Christian Sewing, Deutsche Bank CEO, said in a speech at the Handelsblatt Banking Summit in Frankfurt, as reported by CNBC, that the war in Ukraine “destroyed a number of certainties” on which the global economic system had been founded over for decades.

He allegedly highlighted disrupted global value and supply chains, as well as a labor market bottleneck and a scarcity of gas and power, as important causes for Eurozone inflation reaching record highs.

In his speech, the CEO stated that “As a result, we will no longer be able to avert a recession in Germany. Yet we believe that our economy is resilient enough to cope well with this recession — provided the central banks act quickly and decisively now,” noting that for now, many in Germany still have pandemic savings to fall back on in order to meet skyrocketing energy costs, while most companies remain "sufficiently financed."

However, he warned, “the longer inflation remains high, the greater the strain and the higher the potential for social conflict.”

Sewing also pushed German officials to speed the nation's process to end Germany's dependence on China. He stated that China made up around 8% of German exports and 12% of imports and that China accounts for more than one-tenth of revenues for firms listed on the German DAX stock index.

“Reducing this dependency will require a change no less fundamental than decoupling from Russian energy,” Sewing argued.

Germany issues nearly €65 bln relief to deal with winter energy crisis 

The German government approved, on September 4th, a €65 billion relief package, which includes continued cheaper public transport and tax breaks for energy-reliant companies, as they have been affected the most by the biggest surge in prices.

According to the Federal Statistical Office, Germany's inflation rose to almost 8% in August after declining slightly in the months of June and July.

The consecutive sanctions against Moscow prompted a race against the clock to diminish Germany's reliance on Russian gas before winter. Groceries and food are other sectors experiencing the aftermath of soaring inflation which saw prices surge 12% in June before reaching 16.6% in August.

In a press release after talks on Sunday, chancellor Olaf Scholz said Germany would give €1.5 billion toward public transport discounts after the country's monthly €9 travel ticket offer expired at the end of August, adding that windfall taxes would likely be assessed on energy companies to lower the price of gas, oil, and coal for consumers.

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