The classified report, prepared by the European Commission and leaked to a local magazine, warns that the sanctions could slash forecast growth for the German economy this year by almost one per cent, moving the country closer to a downturn, with grim implications for a weak eurozone.
The report is one of a series prepared by Brussels estimating the costs of “far-reaching” sanctions against Russia for each of the EU’s member states, and distributed to governments in secret just before Easter.
“Governments have since responded to help the commission draw up a balanced programme of sanctions to ensure that particular countries, such as Germany, do not take on a disproportionate burden. This is very sensitive information of great interest to Russia and is top secret,” said a European diplomat.
The report considered the impacts of three different scenarios on European economies.
It found that the harshest, in which sanctions were imposed on the import of Russian gas and oil, would cut expected growth for Germany’s GDP by 0.9 percentage points this year, and 0.3 percentage points next year.
The European Commission’s most recent forecast is for German growth of 1.6 per cent this year and 2 per cent in 2015 amid a weak recovery as the eurozone emerges from crisis.
Sanctions on Russian energy exports are not being openly discussed at the moment.
But the report warned that a second scenario, in which import bans were placed on other Russian products and Russian accounts in Europe were frozen, could still cause forecast growth to fall by 0.3 percentage points this year and a 0.1 percentage points in 2015.
The report warns that the longer-term effects on the German economy could be more serious, as the impact on eastern European economies affected their trade with Germany.
The report underlines why Chancellor Angela Merkel’s government has been reluctant to support harsher sanctions over Ukraine, despite warning that the option of tougher sanctions must be kept open.
On Monday, European Union foreign ministers will consider adding 15 new Russian names and five companies with Crimea links to the sanctions list, following events in eastern Ukraine this weekend.
The change is meant to give a signal to Russian companies that there is no benefit to potentially getting involved in expropriation of Ukrainian companies in eastern Ukraine, where many of the country’s industrial assets are based.
Source: The Telegraph