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

Germany's traffic-light coalition has produced a set of draft proposals for a new package of energy relief measures - but the cabinet is said to be split on which ones to implement. Here are the key plans being discussed.

Electricity meter
A German electricity meter. Photo: picture alliance / dpa | Jan Woitas

With energy prices continuing to soar, yet another package of relief measures is in the pipelines. But each of the parties that make up the traffic-light coalition – the SPD, Greens and FDP – has their own distinct vision on how best to support businesses and consumers.

A set of draft proposals obtained by ARD-Hauptstadtstudio lays out a number of potential measures that could be used to offer relief on fuel, heating and electricity costs. 

According to ARD, there are still a number of disagreements around the plans, but the government hopes to produce a finalised package of measures on Wednesday evening.

Here are the key points in the draft proposals to be discussed.

Fuel and car-tax rebate

Above all, the pro-business FDP is pushing for relief for car owners.

Following two consecutive increases to the commuter allowance – which allows employees to write-off some of the costs of travelling to work – there could be further financial support on the horizon.

The key measure put forward by Finance Minister Christian Lindner (FDP) is a fuel rebate for car drivers. This plan would see drivers treated to an instant discount at the pump, which petrol station operators would then have to claim back from the tax office. 

Also included in the measures is a “one-off rebate” in car tax. Presumably this would be claimed by drivers in their 2022 tax return, meaning more in their pockets in the coming year.

The FDP are likely to face pushback on these ideas from the Greens and from Economics Minister Robert Habeck in particular, who has previously spoken out against a potential fuel rebate.

READ ALSO: German government announces fresh relief package for high energy costs

Expansion of natural gas production

The FDP are also said to be in favour of expanding Germany’s domestic natural gas production. The question of how to secure natural gas is a particularly urgent one in light of the ongoing Ukraine war and Germany’s attempts to ween itself off Russian gas.

This question would have to carefully thrashed out with the Greens, however, particularly when it comes to investing funds that could be used for renewables instead.

Ban on gas heating for new-builds 

With the double-pronged goal of being climate-friendly and socially minded, the Greens are allegedly asking for a ban on gas heating systems from 2023.

Though existing buildings with gas heating wouldn’t be affected, the ban would affect any new housing developed after next year by banning the installation of this type of heater.

Energy money

Another classic policy from the Greens contained in the paper in the disbursement of so-called ‘energy money’ or an ‘energy fund’. This proposal was contained in the Greens’ pre-election manifesto but so far hasn’t been implemented due to questions about how to distribute it.

Essentially, the energy money is a redistribution of the CO2 tax back to consumers – with lower-income households and those who use less energy benefitting the most. 

According to ARD, the Greens now propose that the Finance Ministry develop a way of doling out the money to German taxpayers using their tax ID. The deadline for this would be October.

Petrol prices

Current petrol and diesel prices are listed outside a petrol station on Prenzlauer Alley in Berlin. Photo: picture alliance/dpa | Jörg Carstensen

One-off energy subsidy

The centre-left SPD, who are also the largest party in the coalition, have set their sights on measures for lower-income and vulnerable groups. 

The first of these would be a one-time subsidy for workers in Germany, which would be tapered by income and according to the number of children in any given family. One key issue with this is that the relief would be applied to the 2023 tax return, which means it would be another two years before consumers experience any benefits.

Apparently, the FDP are firmly against this idea and early signs are that it could be replaced with a so-called mobility allowance for people on small and medium incomes.

The exact amounts of either type of relief are currently unclear and would presumably have to be thrashed out in the cabinet.

READ ALSO: EXPLAINED: What Germany’s relief package against rising prices means for you

Child bonus and more for benefit recipients

Another SPD proposal is that a child bonus (Kinderbonus) – similar to the one introduced during the initial waves of the Covid pandemic – should be brought in again “as soon as possible”.

The SPD also wants to ensure that the flat-rate heating allowance for housing benefit recipients, which was agreed in the last package of measures, is paid on a long-term basis.

They also suggest increasing the current supplement by a further €100 as a one-off bonus this year. 

Child bonus

Money and dummies lie together on a table. The SPD is believed to be pushing for a new ‘child bonus’ for families. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

Senior citizens’ lump sum

Pensioners should also benefit from a one-time energy payout, according to the proposals.

The draft outlines the importance of elderly people remaining mobile in the community, even if they aren’t travelling to work each day.

The SPD is apparently also concerned about public transport fares and wants the coalition to ensure that bus and train fares do not rise or that services aren’t cut as a result of rising fuel prices.


What about a cap on energy prices?

This is a measure that the EU Commission is said to be considering at present, alongside other measures such as joint gas purchases throughout the bloc. The EU package of measures will also be discussed on Wednesday.

But Germany is believed to be one of the primary voices against such a measure, with the FDP in particular speaking out against any state intervention in the natural gas or mineral oil markets. 

A more liberal-friendly policy would be to cut taxes on things like electricity and gas in order to provide relief for both businesses and consumers. However, the issue with this is that businesses could use the tax cuts as a means of accruing more profit and continue to raise their prices regardless.

EU commission president Ursula von der Leyen

EU Commission President Ursula von der Leyen (CDU). The EU is currently considering an energy price cap, among other measures. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

When will these measures come in?

As we mentioned, it’s still very early days yet – and many of the policies outlined above the subject of fierce debate within the cabinet.

What we’re likely to see later on Wednesday is some kind of Frankenstein’s Monster, with different measures cobbled together from each party.

Some of these may offer more immediate support – like the child bonus or the energy supplement – while other types of support could be doled out through tax rebates and may therefore take several months or years to come into force, which won’t be much comfort to people struggling at the moment. 

Others, like the Greens’ proposals to ban gas heating, would be structural measures dedicated to the transition away from volatile and climate-damaging fossil fuels. The benefits of these presumably wouldn’t be felt for several years. 

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For members


Why German bank customers could soon pay less for their account

A major German bank is set to scrap fees on large balances - and a number of others look set to follow. Here's why people in Germany may be paying less for their savings or current account in the near future.

Why German bank customers could soon pay less for their account

What’s going on? 

Interest rates have been at rock-bottom levels for years, making it much harder for people to get returns on their savings.

In recent years, many banks have even been levying what’s known as negative interest rates on customers. If interest normally incentivises people to save by helping them to grow their money, negative interest basically does the opposite.

If you have a certain amount of money in the bank, your bank will charge you negative interest via a deposit holding fee, which will usually be a certain percentage of your balance.

With N26, for example, balances of over €50,000 are subject to a 0.5 percent fee each year. For a balance of exactly €50,000, that equates to €250 in bank charges just for keeping your money there. 

Some banks even charge a deposit holding fee for balances as low as €5,000 or €10,000 in a current account. 

On Tuesday, ING Deutschland became the first bank to announce that it would be scrapping negative interest rates for the vast majority of its customers.

From July 1st, new customers of ING will be able to deposit up to €500,000 in their account without being charged for it, while existing customers will automatically have the fee-free amount raised to €500,000 from the current €50,000. 

Now, it seems a number of other German banks are planning similar moves. 

Why is ING Deutschland ending the holding fee?

Not entirely out of the goodness of its own heart – though that doesn’t stop it being good news for customers.

The European Central Bank (ECB) is set to make a decision on interest rates in the bloc this July, and most people expect that the bank is poised to increase interest rates from minus 0.5 percent to zero. 

Since banks have basically been passing on the ECB’s fees to their own customers, a hike in the ECB’s interest rate would spell the end of most negative interest-rate accounts in any case. But ING Deutschland said it wanted to pass on the positive interest rate trend to its customers even earlier.

READ ALSO: EXPLAINED: How to save money on your taxes in Germany

“With the increase in the fee-free allowance for credit balances on the current and extra accounts, the deposit fee is no longer applicable for 99.9 percent of our customers,” said Nick Jue, chief executive officer of ING in Germany. “We were one of the last banks to introduce a deposit holding fee and one of the first to virtually abolish it.”

He added that the bank had already kept its promise to abolish the holding fee for almost all customers before the European Central Bank made its decision.

Does this have anything to do with that court decision on bank charges?

That’s definitely a factor. According to a decision in Germany’s Federal Supreme Court last year, credit institutions have to obtain the consent of their customers when making changes to their fees and conditions.

That means that financial institutions have to ask for consent to current fees retrospectively if they don’t want hoards of people trying to claim their money back.

If a customer doesn’t consent to the fees, the bank will usually close that customer’s account.

Man signs a contract

A man in a suit fills in an official form. Photo: picture alliance/dpa/Pixabay | hnw-Gruppe

According to ING Deutschland, the scrapping of negative interest rates on balances up to €500,000 may help to sway those customers who have not yet agreed to the latest terms and conditions – including the deposit holding fee.

Anyone who agrees to the Ts&Cs will automatically be given the higher allowance as of July 1st.

“ING Deutschland expects that the increase in the allowances will convince in particular those customers who have not yet agreed to the General Terms and Conditions including the holding fee, and that the bank will thus terminate fewer customers than last planned,” ING said in a press release. 


What other banks are planning to do this?

According to reports in Bild and Bialo, the other banks planning on ending negative interest rates (or raising the threshold for fee-free balances like ING Deutschland has done) include:

  • Deutsche Bank
  • Commerzbank
  • Deutsche Apotheker- und Ärztebank (Apobank)
  • Dortmunder Volksbank
  • Hamburger Sparkasse (Haspa
  • Frankfurter Sparkasse
  • Frankfurter Volksbank
  • Mittelbrandenburgische Sparkasse
  • Nassauische Sparkasse (Naspa)
  • Ostsächsische Sparkasse Dresden
  • Sparda-Bank München
  • Sparda-Bank Südwest
  • Sparda-Bank West
  • Sparkasse Hannover
  • Sparkasse Pforzheim Calw
  • Volksbank Stuttgart

What does this mean for my savings?

There’s good news and bad news.

The good news is that, from July, you’ll no longer have to pay exorbitant charges just to store your money in a safe place – and you won’t be penalised for saving more. The bad news, on the other hand, is that low interest rates aren’t going away anytime soon.

So while you won’t be losing money hand over fist, you won’t be earning much of a return on your savings either.

Banks in Frankfurt

Skyscrapers in the financial district of Frankfurt am Main. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

“If the interest rate environment continues to develop positively, we will also let our customers participate in this development,” said ING Deutschland’s Nick Jue. “However, the low-interest phase will continue for the time being and broadly diversified investments will remain important.”

Getting a securities account where your money is invested is one way to try and grow your savings, as is investing in property.

Of course, people with mortgages and other loans benefit from the low interest rates – which could be why the German property market is currently booming. 

READ ALSO: Five ways Germany’s soaring inflation could affect your life