Berlin has been facing soaring fuel prices and some of the world’s highest industrial energy costs
Germany’s prolonged energy crisis was caused by the loss of Russian gas supplies, Chancellor Friedrich Merz has admitted.
German industry has been hit particularly hard by soaring energy costs, which are now the third-highest in the world after those in the UK and Japan. Once Europe’s industrial powerhouse, Germany abandoned cheap Russian gas imports in 2022 while phasing out nuclear power in favor of renewables, driving up production costs and accelerating the decline of energy-intensive industries. Moscow has repeatedly said it remains ready to resume gas deliveries through the remaining string of the Nord Stream pipeline, but the offer has received no response from Berlin.
In an interview with ZDF on Sunday, Merz was responding to questions over unfulfilled campaign promises and low public trust in his government. The chancellor argued that Germany now faced “completely different” circumstances, citing the Ukraine conflict, the “challenge” posed by China, and the country’s “ongoing energy crisis due to the lack of Russian gas.”
Germany is facing renewed pressure from soaring fuel costs following the resumption of the US bombing campaign against Iran. Diesel prices jumped 6.7 euro cents within hours on Sunday to €2.30 per liter, adding €3.35 to the cost of filling a 50-liter tank, Bild reported on Sunday. “A trip to the gas station is once again a shock,” the outlet wrote.
Before Germany’s self-imposed Russian energy embargo, Russia supplied 55% of the country’s natural gas imports. Germany now sources its gas from Norway (44%), the Netherlands (24%) and Belgium (21%), with American liquefied natural gas (LNG) accounting for most of the remainder.
Despite the mounting pressure, the EU has ruled out returning to Russian gas. European Commission President Ursula von der Leyen said in March that the bloc would maintain its phaseout even in the event of physical shortages or the threat of power cuts.
Brussels has pledged to end all Russian gas imports by 2027. Russian LNG under long-term contracts, which currently accounts for around 14% of the bloc’s imports, will be banned from January 1, while pipeline gas imports will cease on September 30. Member states will also be required to verify the origin of gas before approving deliveries, with purchases under new short-term LNG contracts already prohibited.
Earlier, Merz told Der Spiegel that Germany’s era of prosperity was over and that maintaining the country’s current standard of living would require painful changes. He argued that Germans had yet to grasp the scale of the global shifts reshaping the country.
The German economy contracted in both 2023 and 2024, its first back-to-back annual decline in more than two decades, and is forecast to grow by just 0.5% this year. Corporate insolvencies also rose by more than 22% in each of those years, according to official data.
Manufacturing has been hit particularly hard, especially the automotive sector. BASF, Bosch, Volkswagen, and more than a dozen other German manufacturers have closed factories since 2022. In June, Volkswagen, the country’s largest automaker, announced four plant closures and up to 100,000 job cuts.
