Gas prices soar 60%, lowering growth expectations—has nuclear reactivation become Germany's last "lifeline"?

Questioning AI · Why does Germany’s Economy Minister call the nuclear phase-out policy a strategic mistake?

Germany’s energy crisis is worsening at a visibly rapid pace. With ongoing turbulence in the Middle East continuing to drive European gas prices up sharply again, Germany’s Economy Minister has publicly called for a reassessment of the country’s decades-long nuclear phase-out stance, acknowledging that there is no alternative when it comes to base load energy supply.

Germany’s Economy Minister Katherina Reiche said that the nuclear exit policy promoted by successive governments has left Germany with no reliable alternative for base load power, with only natural gas remaining as an option.

Since the outbreak of the U.S.-Iran conflict, European natural gas prices have risen by more than 60% in total; in May, German electricity futures prices were four times those of France.

A coalition of Germany’s major economic research institutes issued a warning this Wednesday, saying that this round of energy shock will wipe out the previously expected GDP growth for 2026 of more than half. The latest forecast lowers the 2026 growth rate to 0.6%, far below the 1.3% predicted in September last year; the expected growth rate for 2027 is also only 0.9%.

Chancellor Friedrich Merz characterized the nuclear phase-out policy as a “major strategic mistake,” and also pledged to end Germany’s prior opposition to nuclear energy at the EU level.

Gas prices soar 60%, Germany’s electricity prices are four times those of France

The trigger for this round of energy crisis was market turmoil following the outbreak of the Middle East conflict. Since the conflict began, European natural gas prices have risen by more than 60% in total, causing Europe to experience a second major energy price crisis in less than five years.

The pressure on Germany’s electricity market is particularly pronounced. According to data from the energy exchange EEX, in May, Germany’s electricity futures prices were four times those of France, the largest nuclear power producer in Europe. This price gap directly reflects a huge divergence in costs between the two energy-strategy choices.

The pain of high energy prices has permeated Germany’s economic system.

Official statistics show that in the second half of 2025, natural gas prices for German private households were 79% higher than in 2021, and electricity prices rose by 23%. For energy-intensive industries that are already under pressure, this cost shock further squeezes profit margins.

Aftermath of the nuclear phase-out: dependence on liquefied natural gas imports

Germany’s current energy vulnerability stems from a policy transition that has lasted for more than a decade. In 2011, then-Chancellor Merkel decided to initiate a nuclear phase-out after the Fukushima nuclear accident; the policy was ultimately completed during former chancellor Scholz’s term.

The nuclear phase-out was accompanied by large-scale expansion of renewable energy. However, when wind power is insufficient and sunlight is scarce, gas-fired power plants become the final line of defense for maintaining grid stability, causing Germany’s dependence on natural gas to keep rising.

After the Russia-Ukraine conflict, pipeline natural gas supply was abruptly cut off, fully exposing the fragility of Germany’s energy strategy. Berlin was forced to quickly pivot to liquefied natural gas imports, much of which comes from the U.S. At present, U.S. natural gas accounts for about 10% of Germany’s total supply, and energy costs have remained high ever since.

Reiche admits that natural gas is now Germany’s “only remaining source of base load supply.” In her view, this structural predicament is the fundamental reason behind calls to reassess the stance on nuclear power.

Growth expectations continue to be revised downward; industry under pressure

The energy shock is directly eroding Germany’s growth outlook. A coalition of Germany’s major economic research institutes issued a warning this Wednesday that this round of energy shock will wipe out the GDP growth expected to exceed half of 2026.

The latest forecast lowers the 2026 growth rate to 0.6%, far below the 1.3% predicted in September last year; the 2027 growth outlook is also only 0.9%.

This figure makes it even more difficult for the German government’s recovery narrative. Although Berlin has rolled out a 10-year infrastructure and defense spending plan worth as much as 1 trillion euros (the largest fiscal expansion since the reunification of the two Germanys), growth momentum remains weak.

Reiche acknowledges that energy-intensive industries are facing clear pressure, but at the same time emphasizes that Germany currently faces no risk of supply shortages.

Reembracing nuclear: from opposition to “returning to the table”

On the policy front, Germany is showing a subtle but noteworthy shift.

Chancellor Friedrich Merz has long labeled the nuclear phase-out policy as a “major strategic mistake.” While the German government has clearly ruled out restarting the shut down traditional reactors, it has shifted to supporting research in small modular reactors (SMRs) and nuclear fusion.

Merz also pledged to end Germany’s previous opposition to nuclear energy at the EU level.

In an interview with the Financial Times, Reiche urged Germany not to continue drifting outside the process of Europe’s nuclear power revival. She pointed out that France, Sweden, and Poland are all either building new reactors or extending the operating lifespans of existing units in order to gain the advantages of nuclear power in low-carbon, dispatchable electricity.

“You can decide not to be interested, then keep using gas and increase reliance on a single energy source; or you can become interested in the technology again.”