(Bloomberg) -- European economies are facing a major new shock from slowing deliveries of Russian natural gas, which threaten to push inflation even higher than the current record levels and drive the continent’s powerhouse Germany into “imminent” recession, Deutsche Bank said.

“What is unfolding in Europe in recent days is a fresh big negative supply shock,” Deutsche Bank analysts wrote, citing a 60% fall in gas flows via the Nord Stream pipeline earlier this month. “If the gas shutoff is not resolved in coming weeks we worry this will lead to a broadening out of energy disruption with material upfront effects on economic growth, and of course much higher inflation.”

The latest squeeze on energy supplies as a result of Russia’s war in Ukraine has raised alarm levels across the continent -- especially in Germany, Europe’s biggest economy and one off the most reliant on Russian gas. Economy Minister Robert Habeck has warned that turmoil from gas markets could spread more broadly, comparing the risk to the crisis triggered by the collapse of Lehman Brothers in 2008. 

The Berlin government said Thursday it’s in talks to provide “stabilization measures” for utility Uniper SE, which is losing some 30 million euros ($31 million) a day because it has to cover missing Russian supplies at soaring spot-market prices. Chemicals giant BASF SE, which relies on gas for production and electricity, said it may have to cut output. 

Europe’s energy crisis is spurring ever-louder recession warnings. Morgan Stanley economists said earlier this week that they now expect the euro area to fall into a contraction in the last quarter of this year, largely because of the risk of reduced natural gas flows.

Persistent gas shortfalls would “raise the risk of an imminent German recession on the back of energy rationing,” as well as signaling “clear downside” for the euro’s exchange rate against the dollar, the Deutsche Bank analysts said.

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