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ENERGY

Secret pact on nuclear deal could fill government coffers

The German government’s plan to extend the life of the country’s nuclear reactors could turn out to be more expensive for energy companies than previously thought, according to a secret agreement cited in a media report on Thursday.

Secret pact on nuclear deal could fill government coffers
Photo: DPA

This week Chancellor Angela Merkel’s centre-right coalition made the controversial call to extend the life of nuclear reactors by an average of 12 years, making some of the country’s 17 plants operational until the 2030s.

Critics have accused the coalition of bowing to pressure from the energy industry, but daily Süddeutsche Zeitung reported that a five-page agreement between the companies and the government absolved this claim, at least in part.

According to the document, if firm profits increase due to the nuclear extension, then so will their required state subsidy payments. Berlin plans to use the money to create a fund for renewable energy, the paper said.

The coalition had said that energy companies would have to pay a levy of €9 per megawatt hour, but the secret document would add a mechanism to increase or decrease the payments according to inflation rates and energy costs up to a certain limit. This component is meant to insure stable subsidy payments, which Economy Minister Rainer Brüderle has said will remain above 50 percent of the companies’ profits, the paper said.

Additionally, the agreement states that up till 2017 energy firms must make advance payments to the government fund totalling €1.4 billion, the paper said. If a future government coalition decided to cut the nuclear plant extension short, they would not have to reimburse the companies for these payments, the agreement says.

The document is said to be a kind of pre-contractual agreement with the nuclear power plant operators, and was hammered out on Sunday night – just after the government announced its plan to extend the reactors’ lifetimes, the paper said.

Why the agreement has been kept under wraps until now remains unclear, particularly in light of heavy criticism from the opposition and environmentalists.

But coalition sources rejected the idea that the government wanted to hide deal-making with the energy companies, the paper said.

“It was always clear that such a complex situation could not be handled out in the open, but instead must be fixed in writing,” a coalition source told the paper. “Everything else would be absurd.”

Meanwhile the opposition has called for the document to be published in full.

“We all have a right to know in what way and how strongly the four large energy companies will influence nuclear energy policy within the government and opposition,” interim parliamentary floor leader for the Social Democrats Joachim Poß wrote to Merkel.

The Local/ka

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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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