Germany announces €65 billion in energy cost relief and promises to cap prices

According to Chancellor Scholz, the package includes proposals to recover surplus earnings from certain energy producers.

The German government on Sunday announced a €65 billion relief package to cushion citizens and companies from skyrocketing energy costs while also vowing to reform the energy market to collect excess profits and cap prices.

"We will get through this winter," Chancellor Olaf Scholz stated at a press conference, announcing a slew of assistance measures as well as an extension of Germany's immensely popular state-subsidized €9 rail ticket.

Scholz also stated that his government would crack down on energy providers who are generating excessive profits in the midst of rising energy costs, which are largely the result of Russia's war against Ukraine as well as Moscow's curtailment of gas deliveries to Europe.

"There are excess profits by some producers who can simply take advantage of the situation that the very expensive price of gas determines the price of electricity, and that therefore make a lot of money," the Social Democratic chancellor told reporters. "We are firmly determined to change the market rules in such a way that such windfall profits no longer occur, or that they are skimmed off."

While gas is only utilised in part to generate energy in Germany, the existing market structure has caused high gas prices to raise general energy prices, implying that providers that generate energy from other sources such as wind, solar, or coal are generating significant profits.

Scholz said that "the many, many billions" of excess profits that the state would collect from such energy providers would be used to finance relief measures and introduce "a price cap for those in the electricity market who do not have to pay the high gas prices." The European Commission is already working on plans to propose such a price cap at the European level.

Scholz's Finance Minister, Christian Lindner of the liberal Free Democratic Party (FDP), had previously expressed resistance to the introduction of an excess-profit tax in Germany; such a tax has already been declared in the United Kingdom and Italy. Lindner, standing beside the chancellor in Berlin on Sunday, endorsed the planned measures, emphasising that this was not a tax in the traditional sense, but rather an intervention in the framework of energy market rules.

Scholz stated that his government would strive to impose the energy price ceiling in accordance with European standards if EU members could quickly agree on them, "or by implementing them on a national basis."

Student and pensioner relief

Scholz stated that retirees would receive a €300 easing, while students would receive a €200 easing. He also promised to increase the number of people receiving state-paid housing allowances from 700,000 to almost 2 million. The current relief package, which comes on top of two previous packages totaling €30 billion, also reduces social security contributions for persons earning less than €2,000 per month and raises child allowances.

Another component of the package is a permanent extension of the €9 transport ticket, which allowed citizens to travel for one month on all buses, trams, metros, and regional trains across the country this summer but expired at the end of August. Although Germany's 16 federal states must yet agree on their portion of the finance, the new monthly ticket will most likely cost between €49 and €69.

"It is a matter of negotiation between the federal government and the states," said Omid Nouripour, the co-leader of the Green party, which rules in a coalition with Scholz's Social Democrats and Lindner's FDP. "We hope that we will very soon be able to agree on a Germany ticket with a price around €49," Nouripour added.

The BDI, Germany's major industry lobby, slammed the relief package, saying it had "severe deficiencies and gaps" because it was primarily aimed at private homes and provided insufficient assistance to businesses suffering from high energy prices.

"The industry expects the government to better include the interests and practical needs of companies in its ongoing crisis management," BDI President Siegfried Russwurm said in a statement.

By fLEXI tEAM