€65bn package ensures Germany ‘gets through this winter’, Chancellor Scholz says – Copyright AFP Vincenzo PINTO
The German government on Sunday unveiled a new multibillion-dollar plan to help households cope with rising prices and said it was eyeing windfall profits from energy companies to help fund the bailout.
German businesses and consumers are hurt by sky-high energy prices as Europe’s largest economy seeks to break free from dependence on Russian supplies following Moscow’s invasion of Ukraine.
Rapid preparations for the upcoming cold season ensure Germany “gets through this winter,” Chancellor Olaf Scholz said at the presentation of the 65 billion euro ($65 billion) package.
The latest agreement, which brings a total of almost 100 billion euros in aid since the start of the war in Ukraine, was negotiated on Sunday night by Germany’s tripartite ruling coalition of Scholz’s Social Democrats, the Greens and the liberal FDP.
Key measures include one-time payments to millions of vulnerable retirees and a plan to take windfall profits from energy companies.
The latest government aid package comes two days after Russian energy giant Gazprom said it would not resume gas supplies via the Nord Stream 1 gas pipeline on Saturday as planned after three days of maintenance.
The government made “timely decisions” to avoid a winter crisis, Scholz said, including filling up gas reserves and restarting coal-fired power plants.
But preventive measures, including the push to cut consumption, have done little to stem the surge in household bills.
– Third package –
The latest announcement follows two previous aid packages totaling 30 billion euros, which included tax cuts on petrol and a popular heavily subsidized public transport ticket.
But after many of those measures expired at the end of August and consumer prices soared, the government was forced to provide fresh support.
Inflation rose again to 7.9 percent in August after falling for two straight months thanks to previous government relief measures.
Rising energy prices are expected to drive German inflation to around 10 percent by the end of the year, the highest in decades.
However, Scholz said not everyone is affected by high consumer prices.
Some energy companies that may not be using gas to generate electricity “just take advantage of the fact that the high price of gas determines the price of electricity and therefore make a lot of money,” he said.
“Therefore, we decided to change the organization of the market in such a way that these accidental profits no longer occur or that they are withdrawn.”
The windfall cut will create “a financial reserve that should be used specifically to ease the burden on consumers in Europe,” the government document said.
Finance Minister Christian Lindner estimated at a press conference that the move could potentially bring in “double-digit billions” of euros in aid.
The government has said it will push for the move to be implemented across the European Union before proceeding to implement the measure on its own.
On Monday, Brussels said it would prepare “emergency” measures to reform the electricity market and impose price controls.
Scholz said he expects the EU to “resolve” the issue “quickly”, adding that “it’s clear that we need fast change in this area.”
– ‘Never walk alone’ –
Reiterating his mantra that Germans will “never get through the energy crisis alone,” the chancellor unveiled a series of measures, including a €300 lump sum payment to millions of pensioners to help cover rising energy bills.
The government will also target students for a smaller lump sum of €200 and heating bills for people on housing allowances.
Berlin has also committed 1.5 billion euros to work on a successor to the hugely popular nine-euro monthly pass on local and regional transport networks.
The aid package as a whole should be funded without planning for additional debt, Lindner said.
“These measures are included in the government’s existing budget plans” covering 2022 and 2023, he said, with the rest covered by energy windfall measures.