SHARE
COPY LINK

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.”

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

UKRAINE

Germany among nations ‘doing the most’ for Ukraine, says chancellor

Germany is one of the countries doing the most to provide military aid to war-torn Ukraine, Chancellor Olaf Scholz said while defending his country's delays in delivering weapons to Kyiv.

Germany among nations 'doing the most' for Ukraine, says chancellor

The long delays for German weapons, compared to the speedy deliveries of US arms, are due to the need to train Ukrainian soldiers in Germany, Scholz told CBS News on the talk show “Face the Nation” broadcast Sunday.

“We will always see that Germany is one of the countries that is doing the most, because what we are sending now is the most sophisticated technology you can use,” Scholz said in the interview conducted Thursday on the sidelines of the NATO summit in Madrid.

Since Russia invaded its eastern European neighbour on February 24th, Berlin has been accused of hesitating – even being reluctant – to send weapons to Ukraine, out of concern for its relations with Moscow.

Certain US weapons were delivered less than 48 hours after President Joe Biden signed off on the transfer, CBS journalist Margaret Brennan noted during her exchange with Scholz.

READ ALSO: Germany’s Scholz vows backing for Ukraine for ‘as long as needed’

But the chancellor said comparing that timeframe to Germany’s weeks or months of delay is unreasonable.

“You should understand that there is a difference of a country like the United States, which spends that much for defense, which is a very big
investment, and you have a lot of weapons and stocks,” said Scholz.

He explained that the rocket launchers sent by other countries were already in stock, but were not necessarily the most modern, whereas Germany will send “the most modern howitzer… on the world market.”

He also expressed concern that Russian President Vladimir Putin had the means to continue his offensive in Ukraine.

“He is really doing this brutal war, and he prepared for it,” said Scholz, noting he thinks Putin decided to invade a year or more before actually doing so.

“So he will be able to continue with the war really a long time.”

SHOW COMMENTS