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BERLIN – The German government on Sunday announced a 65 billion euro relief package to protect citizens and businesses from soaring energy costs while pledging to reform the energy market to collect the excess profits and price caps.
“We will get through this winter,” Chancellor Olaf Scholz told a press conference as he announced various support measures as well as an extension of the ever-popular German state-subsidised €9 transport ticket.
Crucially, Scholz also said his government would crack down on energy providers who make excessive profits amid high energy prices that have been largely caused by Russia’s war on Ukraine as well as the reduction of gas exports from Moscow to Europe.
“There are excess profits from some producers who can simply take advantage of the situation where the very high gas price determines the price of electricity, and who therefore earn a lot of money,” the Social Democrat Chancellor told the journalists. “We are firmly committed to changing the rules of the market so that such windfall profits no longer occur, or are skimmed.”
While gas is only partially used in Germany to produce energy, the current market design has driven up general energy prices due to high gas prices, which means that suppliers who produce energy from other sources such as wind, solar or coal are making huge profits.
Scholz said the “very many billions” of excess profits the state would collect from these energy suppliers would be used to fund relief measures and introduce “a price cap for those who, in the energy market, ‘electricity, do not have to pay the high price gas prices.’ The European Commission is already working on plans to propose such a price cap at European level.
Scholz’s finance minister, Christian Lindner of the Liberal Democratic Party (FDP), had previously raised opposition to the introduction of an excess profit tax in Germany; such a tax has already been announced in the UK and Italy. On Sunday, Lindner – speaking alongside the Chancellor in Berlin – backed the proposed measures, stressing that it was not a tax in the classic sense but rather an intervention under market rules Energy.
Scholz said his government would seek to implement the energy price cap in accordance with European rules, if they could be quickly accepted by EU countries, “or by implementing them at the national level”.
Relief for students and retirees
Regarding the citizens’ aid measures, Scholz said pensioners would receive €300 in relief and students €200. It also pledged to expand state-paid housing benefits from the current total of 700,000 recipients to around 2 million recipients. The new relief package, which comes on top of the two previous packages which together amounted to €30bn, also cuts social security contributions for people with monthly incomes below €2,000 and increases benefits family.
Another cornerstone of the pass is a permanent extension of the €9 ticket, which this summer allowed citizens to travel for a month on all buses, trams, metros and regional trains in the country, but expired at the end of August. Although the 16 German federal states have yet to agree on their share of funding, the price of the new monthly ticket will probably be between 49 and 69 euros.
“It’s a matter of negotiation between the federal government and the states,” said Omid Nouripour, co-leader of the Greens party, which governs in a coalition with Scholz’s Social Democrats and Lindner’s FDP. “We hope that very soon we can agree on a ticket to Germany with a price of around €49,” added Nouripour.
Germany’s main industry lobby, BDI, criticized the relief plan, saying it had ‘significant shortcomings and shortcomings’ because it focused largely on private households and offered too little support to businesses which are also suffering from prices high energy.
“The industry expects the government to better integrate the interests and practical needs of businesses in its ongoing crisis management,” BDI Chairman Siegfried Russwurm said in a statement.
The full document detailing the German relief measures, which were agreed by the three coalition parties overnight, can be read here.
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