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How much money will you get from Germany’s energy relief measures?

The government is providing financial relief to people in Germany to help with rocketing energy prices. They've released calculators to give you an idea of how much cash you'll pocket.

A person holds a handful of cash.
How much will you save through the energy relief measures? Photo: picture alliance/dpa/dpa-tmn | Zacharie Scheurer

Among the measures is a one-off €300 boost to all employed taxpayers in Germany, as well as €200 for people on social welfare and €100 for those on unemployment benefit. 

People on housing benefit will receive a €270 heating cost allowance and €230 for students receiving state support (BAfög).

Meanwhile, families will receive a Kinderbonus amounting to €100 per child.

Other relief measures include an increase in the commuter allowance to 38 cents per kilometre (after the 21st kilometre), a €9 monthly travel ticket for use on public transport, and a fuel tax cut.

There are also a number of tax relief measures that were agreed upon earlier this year.

The government is also scrapping the Renewable Energy Act (EEG) levy on July 1st to save people money on their electricity bills, and there are changes to tax – such as the basic tax-free allowance increasing. 

READ ALSO: KEY POINTS- What Germany’s budget means for you

The packages are aimed at providing financial relief to German residents in the cost of living crisis. In total, it amounts to around €4.46 billion of relief.

How much money are people actually receiving?

The German government has launched a number of resources that give examples of what people are entitled to and will get as financial relief, as well as individual calculators.

On the Finance Ministry’s site, the government shows six examples of what relief people will receive. They include a single person, a family with two children, a pensioner, and a self-employed person. 

Visitors visit stalls at the Central German Pottery Market in Wernigerode, Saxony Anhalt.

Visitors visit stalls at the Central German Pottery Market in Wernigerode, Saxony Anhalt. Several measures should provide financial relief to people in Germany this year. Photo: picture alliance/dpa | Matthias Bein

Here’s a look at two of the examples:

Single person

Arek, 32, is an employed mechanical engineer with a salary of €61,500, who lives in Cologne and commutes to work every day. 

The government says Arek will benefit from the increase in the basic tax-free amount and the employee lump sum, and will receive an extra €146 net.

The €300 one-off energy relief payment that Arek receives through his employer with his salary in September will result in him receiving €185 net (the payment is taxed) in his account. 

READ ALSO: Who gets Germany’s €300 energy relief payout – and when?

As a driver, Arek also benefits from the temporary reduction in energy taxes for fuel for three months: with his daily commute and occasional trips, he drives a total of around 700 kilometres per month. Therefore he consumes about 56 litres of petrol per month and, including VAT for three months, this comes to tax relief of about €59.07.

He also receives tax relief on his electricity costs due to the abolition of the EEG surcharge. For his electricity consumption of around 1,900 kilowatt hours per year, the EEG levy of 3.72 cents per kilowatt hour will no longer apply from July 1st. This results in tax relief of around €35.

Family with two children

Jens, 35, who is a roofer, and office clerk Maria, 33, both earn around €35,000 each. The couple lives in Bad Doberan with two children, and work in Wismar, about 44 kilometres away.

The family benefits from the basic tax-free allowance being increased by €363 retroactively to January 1st, 2022. This amounts to a net relief of €138 for them both. They also benefit from the increase in the long-distance commuter allowance – in 2022, they will be able to claim an increase of around €165 each for their commute to work, i.e. a total of €332. This will save them around €94 net. The tax relief on the basic tax-free allowance, plus the long-distance commuter allowance add up to around €232.

READ ALSO: Why Germany’s energy relief measures are no fix for adequate social security

The €600 (2 x €300) one-off payments that the couple receives in total through their employers with their salaries add up to a plus of about €430 (net) on the family account.

The family receives a Kinderbonus of €200 for the two children (€100 per child). That is paid out in July with child benefit. 

The reduction of the energy tax on fuel also provides relief: the joint journey to work, daily errands, and smaller trips by car add up to about 2,500 kilometres per month. The tax relief, including VAT, amounts to about €70 per month, i.e. €210 for the three summer months.

The family also receives tax relief on electricity because the EEG levy will be dropped. They consume around 4,100 kWh a year. From July 1st, the EEG surcharge will no longer apply, which corresponds to relief of around €76 for them. 

READ ALSO: Why people in Germany have longer for their tax return this year

How can I find out how much I will get?

The Finance Ministry has released two calculators which will help you get an idea of what you will get.

If you’re a taxpayer and want to see how much relief you’ll get with the €300 payout, check out the calculator here where you can input your salary before tax.

To calculate the energy tax on fuel, check out this one where you can input 

As with all of our tax and financial summaries, this is a guide only and should not be taken to constitute specific and tailored financial advice. For tax advice which is personalised to your situation, please contact an accountant or tax specialist. 

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‘€10-€15 more for groceries’: How price hikes are hitting consumers in Germany

Russia's war in Ukraine is driving up energy and food prices. While the German government mulls new measures to protect consumers, buyers are increasingly feeling the price hikes, reports Cecilia Filas.

'€10-€15 more for groceries': How price hikes are hitting consumers in Germany

Consumer prices are rising in Germany – and people are noticing it in their wallets. In May, inflation rose by nearly 8 percent year-on-year, the highest level since the country’s reunification in 1990. First, it was the pandemic and the resulting disruption of global supply chains that pushed up prices, now, it is Russia’s invasion of Ukraine that is driving energy and food prices to record high levels. 

Olaf Scholz’s coalition government launched a €30 billion plan to help German consumers, especially the most vulnerable. The measures included the €9 monthly ticket over summer; fuel tax cuts; energy subsidies; and a one-off €300 payout for all taxpayers, plus a €100 ‘Kinderbonus’ for children.

But while the measures provided temporary relief – in June inflation fell to 7.6 percent – experts fear another surge is around the corner. The numbers could get significantly worse in the coming months when some of the measures end and Germany will face the winter with a reduced amount of Russian gas – or none at all. 

READ ALSO: Who gets Germany’s €300 payout – and when?

Thinking carefully about bigger purchases

People living in Germany are feeling the pinch.

At the supermarket, a shopping bill that used to be between €70-€80 is “now €10 or €15 extra,” says Nicolás, an Argentine expat in his 30s who lives in Berlin.

Unlike in Argentina, where consumers are used to offers and different forms of financing to cover themselves against inflation, Nicolás says he has no strategy and has not reduced his consumption because of the rising prices, although it is impacting him. “You don’t need to pay in instalments (for items), but you do feel the difference. You save less,” he says.

Federico, another Argentina native who has been living in Germany for more than 10 years, agrees.

“It’s not that you have problems making ends meet, but that you save a little less,” he says. “Or if you have to make a big purchase, you might think about it a little bit more.”

He says everyday food products in Berlin have also noticeably gone up. 

“The most classic thing – to buy a kebab which is something everyone eats – you can see how much it has increased,” he adds.

“There is a lot of advertising on TV and radio showing you ways to save, and years ago there was no advertising or products with so many promos. Now, this has become more visible, as there is a much greater variety of bargains and people tend to go after that a little bit more than they used to.”

Fruit and veg being sold at a market in Oldenburg.

Fruit and veg being sold at a market in Oldenburg. Photo: picture alliance/dpa | Hauke-Christian Dittrich

‘Price shocks’

Chancellor Scholz has promised more measures in the coming months to cushion the burden, especially on lower-income families. The Chancellor plans to meet with employers, trade unions and the Bundesbank team in September.

Bundesbank President, Joachim Nagel, said recently that there is a risk of inflation remaining high in the medium term, and the German central bank is forecasting an average rate above 7 percent for 2022.

“For this year, we think that we can really manage the inflation headwinds we see on the energy side but also on the salary side,” Bettina Orlopp, CFO of Commerzbank told Bloomberg TV.  “Next years – 2023, 2024 – the story will be different, becoming more difficult”, she said.

But is Germany really experiencing an inflationary process? Dr. Silke Tober of the Hans Boeckler Foundation’s Macroeconomic Policy Institute (IMK) doesn’t think so.

“The inflation we are experiencing in Germany at the moment, and in the euro area as a whole, is not inflation in the real sense. What we have are price shocks”, she tells The Local. “What really makes an inflationary process is that wages and prices rise, and then you get persistent inflation.

“We are not at that stage. What we are really seeing instead is that the energy price hikes and the increase in food prices are pushing up prices.”

READ ALSO: When will Germany’s rising cost of living slow down?

Tober adds that there are assistance measures which make a difference.

“The government has put in place several transfer payments to households, especially low-income households, and other measures that reduce the burden of inflation,” Tober says.

She expects price rises to come down “substantially” next year, provided the war in Ukraine does not escalate.

However, Tober says: “If we have a gas embargo and no more gas from Russia, we will have another jump in energy prices, and then inflation will stay high next year as well. And then we have the problem that there may be second-round effects, meaning wage increases might be excessive and then will have persistent inflation.”

The expert from IMK says that rising prices are especially affecting lower-income households, who must “cut back on other expenses to pay for food and energy” because they tend to have fewer savings to fall back on.  

“Households with higher incomes tend to have wealth and a high savings rate, so they cope with it by reducing their savings rate or maybe even reducing their savings,” Tober says.

“But low-income households usually, in Germany at least, they don’t have a positive savings rate – that means they’ve already spent all of their money or most of it – and have very little wealth, so what they have to do is actually reduce consumption to deal with the current [price] shocks.”

READ ALSO: What is Germany’s new gas ‘tax’ and who will pay it?

Money lies on a radiator.

Money lies on a radiator. People with gas heating will face much higher costs. Photo: picture alliance/dpa | Patrick Pleul

Ongoing concerns about price hikes

Indeed, June retail sales plunged 8.8 percent year-on-year, the biggest drop since 1994, according to Destatis. Non-essential items such as furniture, household appliances, clothing and shoes were the hardest hit.

On the other hand, to avoid passing on cost increases to customers and remain competitive, several companies are maintaining prices (or raising them at a very low rate) but reducing the content of their products, warned Verbrauchenzentrale Hamburg, a consumer advice centre. These are hidden price increases, generally referred to as ‘shrinkflation’.

With an interest rate of just 0.5 percent, credit or financing purchases in instalments might seem an attractive option to protect from inflation.  However, Verbrauchenzentrale Nordrhein Westfalen, the consumer protection association in the state of North Rhine-Westphalia, says that there hasn’t been, at the moment at least, “increasing demand in our debt counselling service as a result of the current inflation, although we notice ongoing concerns about the price increases”.

“Normally excessive debts and consumer insolvency are not seen immediately but with a time gap -they follow a crisis,” the agency told The Local. “Therefore, it is just possible that in the end, we will see more consumer insolvencies due to these general price increases.”