Germany unveils new plan to tackle soaring energy costs

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The German government announced on Sunday a huge new aid plan to combat skyrocketing energy costs and inflation, which will total 65 billion euros in support. 

“Germany stands together in a difficult time,” said Chancellor Olaf Scholz at a press conference on Sunday. “As a country, we will get through this difficult time.” 

Scholz made the announcement along with leaders from the Greens and the pro-business FDP —  the Social Democrat’s two main coalition partners — after late-night talks on Saturday, which finalised a long-awaited action plan.

Repeating his mantra that Germans will “never” face the energy crisis “alone”, Scholz unveiled the package of measures, including a one-off payment of 300 euros for millions of pensioners and 200 euros for students to cover energy costs.

A planned price cap on a basic amount of energy consumption for families and individuals and a successor to the country’s popular “9-euro ticket” for nationwide public transport were also announced. 

Scholz indicated that windfall profits currently being made by some energy companies will be used to help fund this relief, though it appears members of the FDP are resisting a tax. 

The German chancellor said he was “very aware” that many Germans are struggling to cope with the rising prices and that the government is prepared to help. 

“We take these concerns very, very seriously,” he said.

Inflation rose again in Germany in August to 7.9% over one year, driven by soaring energy prices caused by Russia’s invasion of Ukraine.

In October, a tax to help German energy companies reduce their dependence on Russian gas will come into force, which is likely to cause bills to rise even higher. 

The head of Germany’s central bank, the Bundesbank, estimates that inflation will hit 10% by the end of the year, a first since the 1950s.

The German government announced on Sunday it will develop a replacement of its “9-euro ticket”, which allowed unlimited travel on public transport across the country. 

The 9-euro-per-month ticket was implemented for three months at the beginning of June as part of a government programme to ease high inflation and fuel prices.

Although officials did not announce the new monthly price for this ticket, the agreement released by the three-party coalition made suggestions of 49 euros or 69 euros.

Additional measures planned as part of the package include higher subsidies for families with children, reform of housing subsidies and larger payments for low-income individuals receiving government aid. 

As in other European countries, large energy price rises are fueling public concern and provoking demonstrations, prompting governments to take action. 

Since the beginning of the Russian invasion of Ukraine in February, Scholz’s government has released two packages of support for households, totalling 30 billion euros.

The announcement of Sunday’s plan has been postponed several times, amid friction between the three parties in the ruling coalition. 

Greens and Social Memocrats want a tax on the billions being raked in by energy firms. Meanwhile, the pro-business, liberal camp, represented by Finance Minister Christian Lindner, is fiercely opposed to taxation. 

The German government is calling for the introduction — at the European level — of a “compulsory contribution” to be paid by energy companies, distinct from a tax.  

EU member states are due to meet next week to discuss reforming the European energy market and possible initiatives to quickly reduce consumer bills.

The German government says it is ready to go it alone if no agreement is reached in Brussells, but Scholz is “confident” the 27 member states can reach an agreement.