The German economy will shrink by nearly 2% this year if the war in Ukraine escalates, leading to a boycott of Russian energy resources, weakening external demand and more uncertainty, the Bundesbank said, Reuters reported.

Germany's central bank said the fallout from the Ukraine crisis has already dampened the recovery of the eurozone economy from the downturn caused by the pandemic.

But the picture for the currency bloc, and especially for Germany with its large industrial potential, will be much worse if events in Ukraine lead to the European Union halting imports of Russian crude oil, natural gas and coal.