Faced with rising energy prices, Berlin released 200 billion euros

As the energy crisis drags on, Germany will release up to 200 billion more euros to cap gas and electricity prices that are weighing on its economy and the purchasing power of households, it was announced Thursday, September 29, Chancellor Olaf Scholz. In September, inflation in Germany jumped to 10% for a year, the highest value recorded since 1951, according to provisional figures published the same day.

“Prices must go down (…), the German government will do everything to bring them down” for homes and for business, he hammered. The details of the price cap device, which has been requested for weeks by companies that have been taken by the throat, still need to be refined and the date of entry into force of the measure is not yet known.

Decided after weeks of negotiations within the coalition, it “tariff protection” not first in the European Union, which is facing an energy crisis that has not happened in 50 years. Many member countries, such as France and Spain, have already applied a ceiling on energy prices.

Also read: Rising energy prices: the arrival of a pragmatic and protective Europe

“A clear answer to Putin”

“We find ourselves in an energy war for prosperity and freedom”added Finance Minister Christian Lindner, stressing that the situation has worsened “after sabotage by unknown perpetrators” Nord Stream gas pipelines in the Baltic Sea.

“This energy war is about destroying much of what people have personally built up over decades”said the Minister. “We cannot accept it and we defend ourselves”he added, presenting new measures to help as “a clear answer to Putin”.

Germany is paying a high price for its dependence on Russian gas, which accounted for 55% of its gas imports before the war in Ukraine. He had to find another source of supply in the spot market where the price had exploded. The country will fall into recession next year, economists predict and the energy crisis will leave its mark.

“Gas prices are expected to remain above pre-crisis levels. This will result in a lasting loss of prosperity” for Europe’s first economy, warned the main economic institutions of the country in their autumn forecasts revealed on Thursday. the “shield” announced by Berlin comes on top of previous support measures that have already amounted to almost 100 billion euros.

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A rare public fund

The cap announced Thursday should be financed by the Stabilization Fund for the economy, which was created during the pandemic to support businesses, and which will provide additional resources. This unique public fund, financed through specific lines of credit and therefore not counted in the annual budget expenditure, will allow the government to stay within the nails of the financial commitments.

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Germany wants to return next year to rule “brake debt”, a constitutional principle that prohibits it from borrowing more than 0.35% of GDP per year and which has been suspended since 2020 due to the pandemic. If the budget rule is officially respected, the bill for the energy crisis is already big for the Scholz government, which also promotes the nationalization, or control, of many companies in the energy sector that are threatened with bankruptcy.

With the announcement of the energy price cap on Thursday, Berlin took the opportunity to bury a controversial proposed gas surcharge, which would place an additional burden on households and businesses across the country. It is assumed that the implementation of 1er October, this surcharge is intended to support companies in the gas sector by passing on part of the confusing increase in their costs to consumers. But it has caused an outcry since its announcement this summer, and seems even more outdated after the nationalization in September of Uniper, the first German importer of Russian gas.

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The World with AFP

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