Tuesday, May 30, 2023
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Germany agrees to 200 billion euro package to fend off energy price spikes

Holger Hansen and Kirsti Knolle

BERLIN (Reuters) – German Chancellor Olaf Scholz has formulated 200 A billion euro ($194 billion) “defensive shield” including gas price brakes and fuel sales tax cuts to protect companies and households from soaring energy prices .

Europe’s largest economy is trying to cope with soaring gas and electricity costs, largely due to a collapse in Russian gas supplies to Europe, which Moscow blamed on the West’s invasion of Ukraine in February sanctions.

“Prices have to come down, so the government will do what it can. We’re building a huge defensive barrier for that,” Scholz said.

According to the plan, until spring 2024, the government will introduce an emergency price brake on natural gas, the details will be announced next month. It is scrapping a planned gas tax aimed at helping companies struggling with high spot market prices.

The temporary tariff brake will subsidize the basic consumption of consumers and small and medium-sized companies. Gas sales tax will be reduced from 35% to 7%.

In order to reduce its dependence on Russian energy, Germany is also working to reduce its dependence on Russian energy. Promote the development of renewable energy and develop liquefied gas terminals.

To help households and companies weather any winter supply disruptions, especially in southern Germany, two nuclear power plants that were due to close by the end of the year will be able to continue operating until spring 2023.

Industry groups welcomed the proposal.

“This is an important mitigation measure,” said Wolfgang Grosse Entrup, head of the VCI Chemicals Association. “Now we need to get to the details quickly, as more and more companies have to lean against the wall.”

“Crisis Spending”

This year the package will pass a new Borrowing to finance, as Berlin takes advantage of the moratorium on the new constitutionally mandated debt limit of 0. 35 Percentage of GDP.

Finance Minister Christian Lindner said he hoped to comply with the restrictions again next year.

Lindner of the pro-business Liberal Democrats (FDP), which shares power with Scholz’s Social Democrats and the Greens, said on Thursday the country’s public finances were stable.

“All we can say is: We find ourselves in an energy war,” Lindner said. “We want to clearly separate crisis spending from our regular budget management, and we want to send a very clear signal to the capital market.”

He also said that these measures will play a role in curbing inflation, It reached its highest level in 25 years in September.

Markus Soeder, the premier of the opposition conservative southern state of Bavaria, said the measures sent the right signal.

“It gives industry and citizens confidence that we can get through the winter,” he said.

($1=1.0326 EUR)



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