Germany sets out €16bn aid package to counter soaring energy costs


Germany’s ruling coalition has agreed a relief package expected to be worth about €16bn to ease the burden of rising energy costs, with measures ranging from a three-month fuel price cut to a temporary increase in the use of coal.

Christian Lindner, finance minister, told a press conference on Thursday that the deal aimed to help individuals and companies handle skyrocketing prices triggered by Russia’s invasion of Ukraine.

“The coalition believes that we, the people and the economy, must protect ourselves in the short term and for a limited time in the face of these enormous price increases,” he said.

The exact size of the package has not yet been finalised, but Lars Klingbeil, co-leader of Germany’s centre-left Social Democrats (SPD), told reporters it would be similar to an earlier €16bn relief package passed four weeks ago.

Measures include a one-off €300 tax cut for individuals, plus extra discounts for low-income families. Fuel taxes will be cut for three months, with the price per litre cut by 30 cents for petrol and 14 cents for diesel. For the next 90 days, travellers will also be able to buy a €9 pass giving them a month’s unlimited use of public transport.

Germany’s move comes as Brussels is working on EU-wide plans to curb energy bills and the UK this week unveiled a fuel duty cut.

The deal was heavily contested between Germany’s governing coalition of Chancellor Olaf Scholz’s SPD, the Greens and the pro-business Free Democrats (FDP), with negotiations reportedly stretching late into Wednesday night.

Lindner, an FDP member, had pushed unsuccessfully for a price rebate at petrol stations instead of a fuel tax cut. The Greens also lost a battle for stricter energy efficiency regulations than those eventually agreed.

The agreement also includes a plan to decrease consumption of gas — 55 per cent of Germany’s imports come from Russia — by increasing reliance on coal, a move that could hurt the country’s climate targets. Germany aims to become greenhouse gas neutral by 2045 and hopes to cut emissions by at least 65 per cent by 2030 compared with 1990 levels.

Before the war in Ukraine, the government had aimed to bring forward Germany’s exit from coal — a leading source of greenhouse gas emissions — from 2038 to 2030. In a statement outlining the planned measures on Thursday, the coalition said it would still try to meet that goal.

The government is struggling to balance growing pressure for it to join tougher sanctions on Russian energy, on which it is hugely dependent, and concerns that public unrest will increase as prices rise. As well as its gas imports, Germany obtains 50 per cent of its coal and 30 per cent of its oil from Russia.

The agreement needs to pass in the Bundestag, but that is almost assured given that the three coalition parties hold a parliamentary majority.

The package also includes new energy efficiency targets to be implemented in the coming years. Green leaders have argued this is as critical as bolstering renewables for weaning the country off fossil fuels.

“We don’t know, in these difficult times, what is ahead of us . . . we’re not going to be able to compensate for every burden,” said Green Party co-leader Ricarda Lang.

“That’s why it’s all the more important that we don’t just look at the here and now, but also to how we avoid such situations in the future. In other words: how we can rid ourselves of Russian gas, Russian oil and fossil fuels altogether.”


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