Germany responds to energy crisis with $65 billion relief package

German Chancellor Olaf Scholz’s coalition has agreed a relief package worth around 65 billion euros ($65 billion) to help millions of households struggling with soaring prices amid the Europe’s most severe energy crisis for decades.

Key measures include a vow to cap – and even redistribute – the huge profits made by energy companies as a result of the current crisis; increased payments to pensioners, students, parents and the unemployed; and measures to curb the astronomical rate at which electricity prices are rising.

The measures are “an important and important step to relieve the citizens”, Scholz said during the press conference he held at the Berlin Chancellery to present the agreement. The crisis is “Putin’s responsibility”, he said in reference to the Russian president and the war in Ukraine.

Germany has been facing a spiraling energy crisis since Russia’s decision to all but halt gas deliveries through the Nord Stream 1 gas pipeline following its attack on its neighbor and the heavy sanctions imposed by the international community by the after. On Friday, Gazprom announced that it would not restart the pipeline as planned after three days of maintenance.

The German government has responded by activating the second stage of a three-tier gas contingency plan, and it is considering easing several of its fundamental energy and environmental policies to mitigate the fallout, including extending the operation of nuclear and coal-fired power stations that he had planned to set up. close.

Germany has also pledged to support a European Union effort to limit the profits of energy companies that is currently under discussion. Such a move would create “financial leeway” that could be used to soften the blow of higher prices on European consumers, the government said.

The German wish comes ahead of an emergency meeting of the bloc’s energy ministers next Friday. Other measures the meeting will discuss include price caps on electricity generated from renewables, coal and nuclear.

The latest package presented by the German government is the third since Scholz took office at the end of 2021 to help consumers and businesses cope with rapid inflation. The total relief now amounts to more than 95 billion euros and will lead to “significant additional expenditure in the federal budget”, the government announced on Sunday.

The 65 billion euro figure that the government unveiled on Sunday to deal with the crisis includes contributions from the federal government, states and municipalities. The federal part of the latest plan is around 40 billion euros, a person familiar with the matter said earlier.

The government said it has submitted a draft budget to parliament that keeps next year’s spending within the constitutional limits on public borrowing set by Germany’s so-called debt brake. He said the budget’s “limited financial leeway” will require “substantial efforts from all three coalition partners” and government agencies.

Another element of Sunday’s package is the promise to continue offering a subsidized ticket for domestic journeys on public transport now that the popular €9 summer ticket has expired. The new version will probably cost between 49 and 69 euros, the government said.

Here are some of the main measures of the new package:

  • Support for EU-wide profit caps for energy companies.
  • Brake on electricity prices used for basic consumption.
  • Subsidies to cushion electricity grid prices.
  • Postponement to 2024 a previously planned. increase in the price of carbon emissions.
  • Single lump sum payment of 300 euros for pensioners.
  • One-time lump sum payment of 200 euros for university students.
  • Increase in rent allowances.
  • Increase in social benefits of 500 euros.
  • Increase in family allowances of 18 euros per child.
  • Changing income tax brackets to avoid bracket creep.
  • Extension of various KfW programs to support cash-strapped businesses.
  • Continue to offer subsidized transit tickets.

— With the help of Ewa Krukowska

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