UPDATED: Germany faces threat of economic, social crisis – econ minister

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BERLIN, Sept 29 (Reuters) – German businesses and households must reduce their gas useage further as Germany battles an economic war with Russia, German government ministers said on Thursday.

“The energy crisis that we are experiencing in Europe threatens to grow into an economic and also a social crisis,” Economy Minister Robert Habeck told reporters as the government announced funding of up to 200 billion euros ($194 billion) in response to soaring energy prices.

“We find ourselves in an energy war,” Finance Minister Christian Lindner said, adding that Germany would respond with its full economic might.

Four leading German economic institutes have almost halved their spring economic growth forecast for Europe’s largest economy this year and slashed their 2023 projection to -0.4% from 3.1%, they said on Thursday.

The four institutes now expect 1.4% growth this year, down from 2.7% seen in the spring.

“The crisis on the gas markets is having a severe impact on the German economy,” said the four institutes – Munich-based Ifo, the Kiel Institute for the World Economy (IfW Kiel), the Halle Institute for Economic Research (IWH) and the Leibniz Institute for Economic Research (RWI).

“Soaring gas prices are drastically increasing energy costs, leading to a massive reduction of the purchasing power,” they added in a statement.

Under a risk scenario of a very cold winter, gas shortages and a lack of savings in energy consumption, the institutes expect gross domestic product (GDP) to contract by 7.9% in 2023 and by 4.2% in 2024.

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