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Scholz promises €65 billion to shield Germans through tough winter

Scholz promises €65 billion to shield Germans through tough winter
FILE PHOTO: German Chancellor Olaf Scholz. (Photo: Reuters/Fabian Bimmer)

BERLIN: Germany will spend at least €65 billion (US$64.7 billion) on shielding customers and businesses from soaring inflation, Chancellor Olaf Scholz said on Sunday (Sep 4), two days after Russia announced it was suspending some gas deliveries indefinitely.

The measures, agreed after 22 hours of talks between the three coalition parties, included benefit hikes and a public transport subsidy, to be paid for from a tax on electricity companies and bringing forward Germany's implementation of the planned 15 per cent global minimum corporate tax.

Russia's invasion of Ukraine in February has spurred inflation worldwide and prompted warnings of social and economic turmoil as the world weans itself off cheap energy and flexible global supply chains.

In Germany, where year-on-year inflation was running at 7.9 per cent in August, the effect has been exacerbated by Russia's reduction in volumes of gas pumped to the country, which has caused a surge in the price of energy fuelling Europe's largest economy.

"Russia is no longer a reliable energy partner," Scholz told a news conference, adding that Germany's earlier preparations meant that it would get through the winter heating season.

Gas stores reached 85 per cent full on Saturday, almost a month ahead of schedule, partly thanks to corporate consumers cutting consumption.

But while supplies were sufficient, the government would need to help shield consumers and businesses from the higher costs, he said.

"You'll never walk alone," he added, switching to English to recite a song famously adopted by fans of English football club Liverpool.

The energy crunch came into sharper relief when Russia's state-controlled energy giant Gazprom said on Friday it was keeping closed its main Nord Stream 1 pipeline, the biggest single pipeline carrying Russian gas to Germany.

Scholz rejected suggestions that losing the steady flows of cheap Russian gas off which Germany has prospered for decades could herald a new, darker era for his country.

"Germany will come through this time as a democracy because we are very economically strong and we are a welfare state: The two together are important," he told ZDF television. "With every new windpark, we will become more independent."

The latest package brings to €95 billion the amount allocated to inflation-busting since the Ukraine war began in February. By contrast, the government spent about €300 billion on propping up the economy over the two years of the pandemic.

Finance Minister Christian Lindner said the €65 billion announced on Sunday could end up being more if electricity prices rose further. The windfall tax - dubbed a "coincidence tax" to assuage his party's objections to the original term - would bring in revenues in the "two-digit-billions", he said.

Part of the proceeds would be used to offer €1.7 billion in tax breaks to 9,000 energy-intensive companies, a government document showed.

Source: Reuters/vc


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