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MONEY

Is Germany planning more energy relief measures?

The German government has already unveiled two multi-billion euro relief packages to help struggling households. But with the energy crisis showing no sign of letting up, is there a third one on the horizon?

German themostat
A thermostat in a German apartment. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

As the cabinet prepares to meet on Wednesday, voices calling for new social measures to support citizens are growing louder.

With inflation hitting record levels, unions and centre-left politicians are urging the government to introduce new measures to help offset the soaring consumer prices.

These include a proposal from Agriculture Minster Cem Özdemir to reduce the VAT on certain food products and a proposal from the German Trade Union Confederation (DGB) to raise tax-free thresholds to counteract inflation.

READ ALSO: German Agriculture Minister wants to scrap VAT on fresh food

Ahead of the meeting, SPD leader Lars Klingbeil also aired his support for raising the basic allowance for people on long-term unemployment benefits, otherwise known as Hartz IV. 

“That the standard rates have to be increased, is, I think, absolutely clear,” Klingbeil told German broadcaster Tagesschau. “Because prices are rising everywhere.”

Though the cost of living is currently rising at a rate not seen in 50 years, the last pay rise received by those on Hartz IV amounted to just €3 per month – an increase that the Left Party slammed as “little more than a pittance”.

The second-largest party in the ‘traffic light’ coalition, the Green Party, has also voiced support for a hike in benefits payments. 

Speaking to Tagesschau on Friday, Greens’ parliamentary group leader Britta Haßelmann said the coalition should come to an agreement on Hartz IV. 

“People who suffer enormously and cannot offset this need more support,” she said.

READ ALSO: EXPLAINED: Germany’s plans to ditch sanctions for the unemployed

‘Unfavourable effects’

So far this year, Germany has rolled out two support packages designed to help households with rising costs due to the ongoing energy crisis and Russia’s war on Ukraine. 

Headline measures included a €300 allowance for taxpayers, a one-off payment for benefits recipients, a cut on fuel taxes and a €9 monthly ticket for local and regional transport. The total cost of the measures is estimated at around €30 billion. 

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

However, some experts believe that the current measures aren’t targeted enough.

“Both the fuel discount and the nine-euro ticket are very imprecise, non-specific instruments,” economist Oliver Holtemöller told Tagesschau. “They also have unfavourable effects on wealth distribution.”

In response to the suggestion of extending the €9 ticket beyond September – which the Greens are believed to be in favour of – Holtemöller said the measures should not be prolonged “under any circumstances.”

“In fact, they should be discontinued immediately,” he added. 

The centre-left parties in government are also facing opposition from the pro-business FDP when it comes to new measures.

In recent days, Finance Minister Christian Lindner (FDP) has been reiterating his support for strict caps on future borrowing – a policy known as the debt brake.

READ ALSO:

Energy relief package III? 

According to the government, people shouldn’t expect any new relief package to be announced immediately. 

Linder is currently preparing a provisional budget for 2023 – and is hoping to be able to reinstate the debt brake next year. This budget will need to be approved by the cabinet on July 1st. 

A few days later on July 4th, trade unions and business leaders will meet with the government to discuss how a so-called wage-inflation spiral can be avoided. One option on the table is for unions to commit to lower pay rises in return for more social support from the state. 

Finance Minister Christian Lindner

Finance Minister Christian Lindner (FDP) gives a statement in Berlin on excess profit tax. Photo: picture alliance/dpa | Fabian Sommer

This could determine whether an additional relief package is needed and, if so, whether it’s feasible for the government to keep caps on spending in place for in 2023. 

Speaking to German tabloid Stern, Labour Minister Hubertus Heil (SPD) said it would be impossible for the government to completely compensate for rising prices.

“In principle, I do not see any scope to relieve people who have a very high income,” Heil said. “We have to cushion the consequences of the price development specifically for those people for whom it really is an existential threat.”

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ENERGY

Norway and Germany seek Nato-led cooperation for key undersea structures

Germany and Norway want to start a NATO-led alliance to protect critical underwater infrastructure, their leaders said on Wednesday, weeks after explosions hit two key gas pipelines in the fallout from the war in Ukraine.

Norway and Germany seek Nato-led cooperation for key undersea structures

 “We are in the process of asking the NATO Secretary General to set up a coordination office for the protection of underwater infrastructure,” German Chancellor Olaf Scholz told a press conference in Berlin.

“We take the protection of our critical infrastructure very seriously and nobody should believe that attacks will remain without consequences,” he said.

Norwegian Prime Minister Jonas Gahr Store said the alliance would be “an informal initiative to exchange between civilian and also military actors” with NATO providing “a centre, a coordination point”.

Underwater cables and pipelines were “arteries of the modern economy” and it was necessary to create “a coordinated joint effort to ensure security for this infrastructure”, he said.

Scholz said he and Store would propose the plan to NATO Secretary General Jens Stoltenberg, who is due in Berlin for a security conference. The Nord Stream 1 and 2 gas pipelines off the Danish island of Bornholm were targeted by two huge explosions at the end of September.

The pipelines, which connect Russia to Germany, had been at the centre of geopolitical tensions as Moscow cut gas supplies to Europe in suspected
retaliation to Western sanctions over the invasion of Ukraine.

Although they were not in operation when the leaks occurred, they both still contained gas which spewed up through the water and into the atmosphere.

Russia and Western countries, particularly the United States, have traded bitter barbs over who is responsible for the blasts.

Several European countries have since taken steps to increase security around critical infrastructure. 

The G7 interior ministers warned earlier this month at a meeting in Germany that the Nord Stream explosions had highlighted “the need to better protect our critical infrastructure”.

Norway has become Europe’s main gas supplier in the wake of the war in Ukraine, taking the place of Russia.

The Scandinavian country has a vast network of pipelines, stretching for almost 9,000 kilometres, linking it to the continent, which experts have said are at risk of sabotage.

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