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Cracks widen in euro zone economy as war in Ukraine rages on

Sanctions on Russia following its invasion last month have pushed energy prices to record highs across the continent, sapping confidence and raising the risk of another recession, even before some states have recovered from a COVID-fuelled downturn.

March 31, 2022 / 06:24 AM IST

Europe's economy is increasingly strained by Russia's war in Ukraine as growth stalls, confidence plummets and inflation soars, data and warnings from policymakers made clear on Wednesday.

Sanctions on Russia following its invasion last month have pushed energy prices to record highs across the continent, sapping confidence and raising the risk of another recession, even before some states have recovered from a COVID-fuelled downturn.

Germany, the bloc's biggest economy and one of the most reliant on Russian energy, will be among the hardest hit and the government's council of economic advisers on Wednesday more than halved their growth forecast for this year, to 1.8%.

"The risk of a recession is substantial," Volker Wieland, one of the panel's members said, adding the economy would now take until the third quarter to return to its pre-pandemic size.