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Germany agrees on €65 billion relief package

September 4, 2022

Germany's coalition government has agreed on a plan to provide financial assistance to households amid the energy crisis. "We will get through this winter," said Chancellor Olaf Scholz.

A pile of euro banknotes
The plan aims to shield German households and businesses from the impact of surging inflationImage: Wolfgang Filser/Zoonar/picture alliance

The German government on Sunday agreed to a €65 billion ($64.7 billion) plan to ease the pressure on households amid spiraling inflation and energy costs as Russia cuts off its gas supplies to Europe.

The third package of relief measures includes plans for continued cheaper public transport tickets and tax breaks for energy-intensive companies.

What problems do German households and businesses face?

According to the Federal Statistical Office, inflation in Germany rose to almost 8% in August after dipping slightly in June and July due to short-term government programs to reduce the consumer burden in the transport sector.

The energy sector has seen the biggest uptick in prices, with Russia's invasion of Ukraine and the subsequent sanctions against Moscow prompting a race against the clock to reduce Germany's dependence on Russian gas before winter.

Another sector experiencing soaring inflation is groceries, which saw prices surge 12% in June before reaching 16.6% in August.

Inflation is hitting Germany's poor

What did the chancellor say about the package?

Speaking to reporters after talks that went into the early hours of Sunday, Chancellor Olaf Scholz said his government would give €1.5 billion toward continuing public transport discounts after the country's monthly 9-euro travel ticket offer expired at the end of August after three months. Scholz also said windfall taxes would likely be levied on energy companies to lower the price of gas, oil and coal for consumers.

The chancellor also gave reassurances on Germany's energy supply ahead of the winter, after Russia announced a halt to gas supplies to Europe through the Nord Stream 1 pipeline on Saturday.

Scholz said his government had made "timely decisions" to avert shortages in winter, such as filling gas storage facilities and restarting coal power plants.

Later Sunday, in an interview with public TV channel ZDF, Scholz said everything "as far as humanly possible" is being done to ensure there are no blackouts.

He added that the electricity price cap would be introduced "as soon as possible."

This is the third relief package this year. The two previous packages included a gasoline rebate, which expired at the end of August, the nine-euro transportation ticket and an energy price flat payment to workers.

The three parties in his coalition, the center-left Social Democrats (SPD), the climate-friendly Greens and the neoliberal Free Democrats (FDP) deliberated until late in the night before announcing the measures.

Germany prepares for worst-case energy scenario

Opposition says relief package is lacking  

German opposition parties, such as the center-right CDU/CSU faction in Germany's parliament or Bundestag, criticized the new measures.

CDU/CSU faction deputy chair Jens Spahn told the news portal t-online that there was "nothing concrete" in either of the plans to relieve the high cost of electricity, replace the nine-euro public transport ticket or give subsidies for energy-intensive firms.

"The implementation will take a long time, instead of relieving the burden immediately and in a targeted manner," he added, while the "biggest problem, the extremely high gas price" had been left untackled.

CDU chair Friedrich Merz told ZDF that he approved of the social aspects of the relief package but warned of an electricity "supply shock" due to the lack of Russian gas.

He called for Germany's three remaining nuclear plants, which are due to close at the end of the year, to continue operating to shore up power supplies.

The socialist Left Party leader Amira Mohamed Ali told the Funke newspaper group that the measures "still fall short of the 100 billion that was decided overnight for rearmament," referring to Scholz's pledge to boost military spending in the days after Russia invaded Ukraine in February.

The far-right Alternative for Germany's (AfD) Alice Weidel and Tino Chrupalla warned that the relief package would spur further price increases.

"We must end the unspeakable economic war with Russia, put the Nord Stream 2 [gas pipeline] into operation, ensure the continued operation of the nuclear power plants and force the European Central Bank to end its irresponsible monetary policy," the pair added.

mm, tj/sri (AFP, Reuters)

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