peaked at about 180 billion euro in the first quarter of this year. in addition, governments are taking action to cushion the impact of energy price increases with support measures, not least for those most affected. on the other hand, high inflation is not only eroding households ’ purchasing power. high inflation and the uncertainties related to the war are also weighing on their confidence. surveys show that consumer sentiment has deteriorated considerably. households could be putting off purchases for precautionary reasons. the russian attack on ukraine has added new layers of risk. when the attack began, germany and the euro area expected a strong recovery from the pandemic crisis. in our baseline scenario, the impact of the war will depress economic growth. yet it is unlikely to derail the recovery. nonetheless, in the present situation of extraordinary uncertainty, more adverse scenarios also 1 / 3 bis central bankers'speeches have to be considered. in our latest monthly report, we published a macroeconomic simulation exercise. the study suggests that an escalation of the war in ukraine – including a full, immediate stop to russian energy deliveries – could cause the german economy to contract by up to 2 % this year. however, even if the scenario itself were taken for granted, this outcome would still be subject to high uncertainty. and it appears that the past weeks have been used to reduce germany ’ s dependence on energy imports from russia, which may dampen the impact of an embargo. 3 inflation outlook while russia ’ s invasion of ukraine is substantially dampening european growth prospects, it is additionally driving up already soaring inflation rates. mainly due to the rise in energy prices, inflation rates in the euro area have climbed to unprecedented levels. additionally, underlying price pressures have also strengthened considerably. in the euro area, the inflation rate stood at 7. 5 % in april. in germany, the rate as measured by the harmonised index of consumer prices even amounted to 7. 8 %. the last time german inflation rates were similarly high was in the early 1980s. in line with soaring energy commodity prices, higher transport costs and supply bottlenecks, import and producer prices have picked up sharply as well. this feeds through to consumer prices. here not only heating oil, gas or fuels have become more expensive but also food and other goods. services inflation also proved very dynamic as services were particularly affected by the measures to contain the pandemic. overall, price rises have become more widespread, and there is still considerable price pressure from

consequence, refinancing stood on a basis that was prone to disruption. admittedly, it was indeed possible to observe similar developments at other large banks. however, the ownership structure of the landesbanken would have suggested other, namely lower risk preferences and a different business orientation. this practice was, in any case, a long way removed from the idea of the landesbanken, in terms of their lending policy, making a contribution to the development of their own federal state. the business policy of such landesbanken had moved a long way from the principle of decentralisation. this explains why these institutions were hit particularly hard by the financial crisis. these trends were evident right up to the brink of the crisis. with the crisis, there occurred the second big event of the past decade from the point of view of the landesbanken. the crisis revealed the vulnerabilities of the business models : with the crisis of confidence in the interbank market, the landesbanken were now faced with major wholesale funding problems and, in several cases, even by considerable needs for write - downs that had to be covered by taxpayers. credit substitution business collapsed. and in the wake of the general deleveraging process, domestic business was rediscovered. 4. from crisis - prone business models to a restructuring of the landesbank sector one thing seems clear to me in this context : for the majority of landesbanken, the issue of stable business lines and structures can be delayed no longer. what therefore has to be done to put less crisis - prone structures in place? the future viability of the landesbanken sector hinges quite crucially on whether it is possible to develop sustainable business models and also on the willingness to reduce capacity surpluses. up to now, there has been only isolated large - scale cost - cutting measures and, at most, selective adjustments to the business models. certainly, there is no master plan for the transition from crisis - prone business models and structures towards a robust reorganised system. nor is it the central bank ’ s or the supervisors ’ job to develop the specifics of business models. the supervisors ’ task in this area is merely to verify the consistency between business and risk strategies, and any structural change should, as far as possible, be subject to market processes and the business rationale of the savings banks and the other supporting organisations. nevertheless, it may indeed be possible to sketch out a few key features of a