Germany agrees to relief package against energy crisis for 65,000 million euros

First modification: 09/04/2022 – 20:56

“We will get through next winter,” Chancellor Olaf Scholz promised on Sunday, as Germany scrambles to take action in the face of what is forecast to be a difficult season this year.

After 22 hours of talks between the three coalition parties, Berlin approved a third package for 65,000 million euros to alleviate the impact of inflation on citizens’ pockets and the effects on companies, in the midst of the energy crisis.

The new aid plan includes increases in benefits and a public transport subsidy, as well as 1,700 million euros in tax exemptions for 9,000 companies that require a large use of electricity.

In addition, Germany advances the implementation of the global minimum corporate tax of 15%.

“You will never walk alone,” the German government leader added during the announcement, switching to English and referring to a famous song adopted by fans of the Liverpool football club.

Europe’s largest economy thus seeks to ease burdens and free itself from dependence on Russian supplies.

“Germany will overcome this moment as a democracy because we are very strong economically and we are a welfare state: the two together are important (…) With each new wind farm, we will be more independent,” said Scholz, who explained that at the end of this year The first LNG (liquefied natural gas) terminals would be operating in the North Sea.

The package announced in the last hours adds to two more previously agreed, for 30,000 million euros, which included a reduction in the tax on gasoline, single payments to millions of vulnerable retirees and a popular heavily subsidized public transport ticket.

But with many of those provisions expiring at the end of last August and consumer prices on the rise, the government has been under pressure to provide more assistance.

Preventive measures to date, including an attempt to reduce consumption, have done little to stem a sharp rise in household bills.

The third package raises to 95,000 million euros the amount allocated to the fight against inflation since the war in Ukraine began on February 24.

In Germany, inflation rose again to 7.9 percent in August, after falling for two consecutive months thanks to earlier easing measures.

However, experts expect the new rise in energy prices to push the overall cost of living to around 10% by the end of this year, which would be its highest rate in decades.

Energy, the bone of contention in the political-economic struggle

The invasion ordered by Russian President Vladimir Putin against his neighboring country and the consequent financial and international sanctions on Moscow, the main exporter of hydrocarbons to several nations of the Old Continent, have raised energy costs, which in turn trigger inflation.

The scenario is set to worsen after last Friday, September 2, the energy giant Gazprom, controlled by the Kremlin, reported that it was completely and “indefinitely” closing the Nord Stream 1 gas pipeline. It is the most important for Europe that pumps the resource from Russian soil to German territory.

Moscow argued that its decision is based on an oil leak in a turbine, which can only be repaired by a specialized company. He initially stated that it would be an interruption for three days. Later, he abruptly announced the total cessation, something for which he blamed the European bloc for not maintaining its systems.

However, there are those who claim that the Russian government uses its hydrocarbons as a “weapon of war”. Moscow gave up the tap just hours after the group of the seven strongest economies in the world (G7) agreed to limit the price of Russian oil.

“Russia is no longer a reliable energy provider. That is part of the new reality. The German Government prepared for this scenario,” Olaf Scholz said this Sunday, while assuring his citizens that his Administration has taken all measures to control the situation.

The 65 billion euro relief plan announced on September 4 could be increased if electricity prices rise further, Finance Minister Christian Lindner said.

With Reuters and AFP