German business backs sanctions on Russia despite domestic impact

[March 10, 2022]  BERLIN (Reuters) - Germany's BGA trade association said on Thursday a survey of its members showed most expected an economic slowdown as a result of the Ukraine conflict, but that business nonetheless backed the government's sanctions against Russia.

General view of empty streets in a business district near the central train station Hauptbahnhof, amid the coronavirus disease (COVID-19) pandemic, during lockdown in Berlin, Germany, January 20, 2021. REUTERS/Fabrizio Bensch

Supply chain bottlenecks, which the conflict has aggravated, mean that some economists' forecasts from the beginning of the year for 3-4% economic growth in 2022 were "waste paper", BGA President Dirk Jandura said in a statement.

"Companies are holding the line and supporting the German government's stance in the sanctions against Russia," Jandura added. "The current sanctions are also having an effect on us ... And nevertheless, the sanctions are right."

Some 62% of several hundred BGA member firms surveyed expected a slowdown as a result of the conflict and 32% feared an interruption of the economic recovery, the association said.

Increased pressure on suppliers stemming from the conflict meant that a decline in inflation from around 5% could not be expected in the medium-term, Jandura said.

Although Russia accounted for only 3% of Germany's foreign trade, the impact of the Ukraine conflict is rippling through a globally networked economy with changes to flight routes, for example, leading to delayed and more expensive goods.

The BGA cited aluminium producers and the food trade as areas that could be affected by bottlenecks, along with toilet paper and kitchen roll, and chemical cleaning agents.

Transport problems were exacerbated by higher fuel costs and a shortage of Ukrainian truck drivers, it said.

Germany's BGL Federal Association for road haulage, logistics and waste disposal said the logistics sector in Europe was suffering from the loss of more than 100,000 Ukrainian truck drivers due to conscription orders.

To address record-high fuel prices, the BGL called for a crisis summit with the government and tax relief for the logistics sector.

"Companies are really desperate," said BGL chief Dirk Engelhardt. "That's why we as an industry are calling for temporary support from the state."

(Reporting by Paul Carrel and Rene Wagner; Editing by Madeline Chambers, Kirsten Donovan)

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