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ENERGY

Merkel rejects industry attack on nuclear tax

Chancellor Angela Merkel on Sunday dismissed angry calls by German business leaders to scrap a planned tax on nuclear energy production which they call a threat to investment.

Merkel rejects industry attack on nuclear tax
Merkel on ZDF Sunday night. Photo: DPA

Asked in an interview for public broadcaster ZDF whether taxes on the nuclear energy sector amounting to €2.3 billion per year would still be introduced, Merkel replied, “Of course.”

She said she assumed the tax would be in the form of a direct levy on nuclear power plants, in exchange for an extension of the reactors’ lifetimes beyond a planned shutdown in around 2020 agreed by a previous government.

“We (the cabinet) proposed a tax on nuclear power plants and as long as there is no other proposal on the table, this is the tax that will come,” she said.

Some 40 business leaders lashed out at the government in a full-page newspaper advert on Saturday, warning that the proposed tax on the country’s 17 nuclear power plants would hamper investment in Europe’s biggest economy during a nascent recovery.

While the Environment Ministry wants some of the revenue from a nuclear energy tax to go toward promoting renewable energies such as wind or solar power, Merkel said it would go toward balancing the budget.

Merkel underlined her centre-right government’s commitment to slowing the phase-out of nuclear power agreed by her predecessor Gerhard Schröder, arguing that Germany was not ready to do without the energy it supplies.

“I am firmly convinced that it is necessary to allow the nuclear power plants to run longer,” she told ZDF.

Merkel’s government aims to unveil a broad energy policy overhaul by the end of September, including a new plan for the nuclear phase-out.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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