Germany's economy is contracting already and the natural gas squeeze means it'll keep shrinking all winter, central bank says

• Germany's economy is already shrinking, and that will continue, the Bundesbank said Monday.
• Even if Germany avoids strict natural gas rationing, the economy probably will still contract as industry reduces or freezes production, it added.

Germany's economy is already contracting, and that will continue through the winter months as the natural gas crisis worsens, the Bundesbank said on Monday.

"Economic activity may pull back somewhat this quarter and shrink markedly in the autumn and winter months," the central bank said, according to Reuters.

And even if Germany avoids strict natural gas rationing, the economy probably will still shrink as industry reduces or freezes production, the Bundesbank added.

But it does not expect a 3.2% contraction in 2023 — a potential downside scenario issued earlier this year — to come to fruition.

Russia previously supplied about 40% of Europe's gas, but those deliveries have dwindled dramatically since February when Vladimir Putin launched his invasion of Ukraine.

Over recent months, Russia's state-run Gazprom has slashed natural gas deliveries via the Nord Stream 1 pipeline, and now it's completely shut off.

Meanwhile, Putin on Friday shirked responsibility for the energy shortage in Europe, saying the European Union could turn on the new Nord Stream 2 pipeline, which has been shelved since February, for additional supplies.

"The bottom line is, if you have an urge, if it's so hard for you, just lift the sanctions on Nord Stream 2, which is 55 billion cubic metres of gas per year, just push the button and everything will get going," Putin said in Uzbekistan, according to Reuters.