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Germany will spend at least 65 billion euros ($64.7 billion) to protect its customers and businesses from higher prices, Chancellor Olaf Scholz said on Sunday, two days after Russia announced it was suspending some gas supplies indefinitely.
The measures agreed after 22 hours of talks between the three coalition parties include benefit increases and public transport subsidies, paid for by taxes on electricity companies, and the implementation of Germany’s proposed 15% global minimum corporate tax.
Russia’s invasion of Ukraine in February sent prices soaring around the world and warned of social and economic upheaval as the world weaned itself off cheap energy and volatile global supply chains.
In Germany, where annual inflation stood at 7.9 percent in August, the effect was exacerbated by Russia’s cut in gas supplies to the country, fueling energy price hikes that are fueling Europe’s biggest economy.
“Russia is no longer a reliable energy partner,” Scholes said at a press conference, adding that Germany’s early preparations would spend the winter warming period.
Oil inventories reached 85% on Saturday, a month earlier than planned, partly as corporate consumers cut consumption.
But even if supplies are adequate, the government will need to help protect consumers and businesses from higher costs, he said.
“You’ll never walk alone,” he added, switching to English to sing the song, which has been adopted by fans of English soccer club Liverpool.
The energy rush was further relieved when Russian state-controlled energy giant Gazprom said on Friday it was closing the Nord Stream 1 pipeline, the largest single pipeline that delivers Russian gas to Germany.
Scholes denied that the loss of a steady flow of cheap Russian gas, which Germany has thrived on for decades, could herald a new and dark age for his country.
“Germany comes across as a democracy at this time because we are very economically strong and because we are a welfare state, the two are important together,” he told ZF television. “With every new wind park, we become more independent.” It brings the amount earmarked for inflation to 95 billion euros since the war in Ukraine began in February. In contrast, the government spent 300 billion euros to boost the economy in the two years since the outbreak.
Finance Minister Christian Lindner said the 65 billion announced on Sunday could increase if electricity prices rise. He said the windfall tax – dubbed the “chance tax” to ease opposition to his party’s first term – would generate “double-digit billions” in revenue.
A portion of the proceeds will be used to provide 1.7 billion euros in tax breaks to 9,000 energy-intensive companies, according to a government document.
($1 = 1.0049 EUR)
(Only the headline and image for this report may have been reproduced by Business Standard staff; the rest of the content was generated automatically from the syndicated feed.)
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