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MONEY

What’s in Germany’s support package for rising energy bills?

From payments to pensioners and students to a new public transport ticket, here's what the German government is planning to help people with rising energy prices this winter.

A woman in Germany holds cash notes in her hand.
A woman in Germany holds cash notes in her hand. Photo: picture alliance/dpa | Daniel Karmann

What’s happening?

The German government has unveiled a fresh €65 billion plan to help residents cope with soaring energy prices. 

Among the headline measures are one-off payments to pensioners and a plan to skim off energy firms’ windfall profits.

They were agreed by the ruling traffic light coalition, made up of the Social Democrats (SPD), Greens and Free Democrats (FDP). 

It came days after Russian energy giant Gazprom said it would not restart gas deliveries via the Nord Stream 1 pipeline on Saturday as planned after a three-day maintenance.

On Sunday during the unveiling of the plans, Chancellor Olaf Scholz said: “We will get through this difficult period as a country.”

READ ALSO: Germany agrees €65 billion energy relief package

A glance at the key measures:

€9 ticket successor: Germany’s hugely popular €9 ticket, which allowed people to travel on local public transport networks across the country, will be followed up. A new nationwide ticket is to be introduced by the coalition – and it is likely to cost somewhere between €49 and €69 per month.

According to the resolution paper, the government will contribute €1.5 billion a year to a ticket. The prerequisite is that the states provide at least the same amount, so this will need to be thrashed out and agreed. 

Electricity price brake: The coalition wants to introduce an electricity price brake for ‘basic consumption’. This would mean that for a certain amount of electricity use, a discounted price should apply in the future. For additional consumption beyond that, the price would not be capped.

Plans to clamp down on energy firms’ profits: Germany wants to work with the EU to stop firms from profiting from the crisis. Energy companies are earning “insane amounts of money” under the current system, Economy Minister Robert Habeck said in a statement. The EU said on Monday it would prepare “emergency” action to reform the electricity market and bring prices under control.

The trimming of windfall profits would create “financial headroom that should be used specifically to relieve the burden for consumers in Europe,” the German government said in its policy paper.

Home office allowance continues: Those who work from home will be able to deduct €5 per working day in income-related expenses from their taxes up to a maximum of €600 per year. The regulation was supposed to expire at the end of the year – now there is no end date. The measure was originally brought in during the pandemic. 

One-off payment for pensioners: A €300 payment for pensions is set to be paid out on December 1st. Under the plans it will be paid out with pension insurance in a bid to make it quick and unbureaucratic.

One-off payment for students: Students in Germany will receive a one-time payment of €200 in December. However, the payment method still has to be discussed with the states.

Heating allowance for those on housing benefit: From September to December 2022, a further one-off heating cost allowance is to be paid to recipients of housing benefit. After that, the subsidy for those entitled to housing allowance will be permanently integrated into the housing allowance. And the number of people entitled to housing benefit will be increased to two million under government plans. The housing allowance is also to include a permanent climate component and a permanent heating cost component to cushion rising energy prices to a greater extent.

No-one cut off from supplies: The government says that no households will be disconnected from electricity and gas if customers are unable to pay their energy bills – even if they are receiving assistance.

Help for lower earners: The limit above which social security contributions have to be paid will be raised to €2,000 for so-called midi jobs from 2023. This means lower earners will be able to keep more of their income.

What else do we know?

The package will also include some of the measures already outlined by the government, such as the plans by the Finance Ministry to help employees from seeing their pay increase be eaten up by inflation in a phenomenon, called “cold progression”.

READ ALSO: Germany pledges inflation relief tax worth €10 billion

There will also be more support for families: Germany is planning to increase child benefits for families from the start of 2023.

Meanwhile, with the introduction of Bürgergeld at the beginning of next year, the coalition plans to increase the standard rates for the long-term unemployed to around €500 per month. Today, single people on basic benefits receive €449 per month.

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ENERGY

Germany to push ahead with gas levy plans

The German government will continue with a plan to charge consumers a gas surcharge despite the move to nationalise energy company Uniper, it emerged on Wednesday.

Germany to push ahead with gas levy plans

German Economy and Climate Minister Robert Habeck said the controversial levy, which will see ordinary people bear some of the soaring costs that gas importers are dealing with as energy prices rise, will still be brought in – even though energy company Uniper is being put under state control.  

The levy is set to be imposed from October 1st and is aimed at propping up the German energy market. 

During a press conference in Berlin, Habeck, of the Greens, said the levy will be introduced as planned and is needed as a bridge to ensure Uniper’s financial solidity. 

The Economy Ministry announced earlier in the day that the troubled gas giant was being nationalised in a deal that will leave Germany with a 98.5 percent stake in the company.

Habeck said the planned takeover of the group would take at least three months. He pointed out that after this point, when Uniper becomes a state-owned company, Germany would have to consider whether the gas surcharge would still be in line with the constitution.

All gas customers will have to pay an additional 2.4 cents per kilowatt hour from October, which means an extra burden of several hundred euros per household. Under initial plans, the surcharge is set to be in place until April 1st 2024. At the same time, there will be a VAT cut on gas consumption to seven percent, down from the usual 19 percent. 

Habeck said a fiscal constitutional review to assess the situation would be undertaken by the Finance Ministry. If the levy cannot be imposed after Uniper becomes state-owned, there will have to be an alternative, he said.

“As we have shown, the state will do everything necessary to keep companies stable on the market at all times,” Habeck said, adding that this applied to Uniper but also to other systemically important gas importers.

As The Local reported, a draft document recently showed that the government is planning to delay payments on the surcharge due from customers.

READ ALSO: Payments for Germany’s gas levy ‘not due until end of October’

The advance payments for October and November should “not be due before October 31st, 2022”, said the draft plans from the Federal Ministry of Economics dated Monday September 12th. 

There has been a lot of controversy over the surcharge after it emerged that some companies registered to receive a share included firms that have not been struggling in the current situation. 

Habeck admitted mistakes in the design of the levy and pledged to amend. Under new proposals, firms that have made profit will be excluded and there will likely be restrictions on the salaries that managers receive if the company is benefiting from the surcharge. 

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