Germany Set to Announce Aid Package of About €40 Billion

(Bloomberg) --

German Chancellor Olaf Scholz’s coalition has sealed a relief plan worth about 40 billion euros ($40 billion) to help millions of households cope with soaring electricity prices amid Europe’s harshest energy crunch in decades, a person familiar with the matter said.

The federal government’s consumer relief funding is set to cover the balance of 2022 and 2023, and the overall package will be even bigger because of contributions from regional governments, the person said. 

A government spokesperson couldn’t immediately be reached to comment. The government said earlier Sunday that it will provide details on the package at 11 am local time. 

Germany faces a spiraling energy crisis triggered by Russia’s decision to all but shut down gas deliveries through the Nord Stream 1 pipeline in the wake of its war on Ukraine and international sanctions. 

The German government has activated the second stage of its three-level gas emergency plan and it’s considering relaxing several of its core energy and environmental policies to mitigate the fallout, including extending the life cycles of its nuclear and coal power plants.

War’s Impact 

Soaring energy prices and Germany’s multiple policy changes on Ukraine have become major liabilities for Scholz in his first year as chancellor, with his popularity rankings sagging. 

His party has already suffered an electoral defeat since Russia started the war in Ukraine, highlighting how rapidly inflation has become the biggest challenge to governments across Europe. 

The package will be Scholz’s third since he took office less than 10 months ago. The previous two were worth more than 30 billion euros. 

One likely component of the new relief is a measure, presented by Finance Minister Christian Lindner in early August, designed to provide tax adjustments worth about 10 billion euros. 

The measure would be an attempt to ease the burden on people from so-called “bracket creep,” in which people are pushed into higher tax categories because they receive a pay increase to offset rapid inflation.

(Adds likely package component in last paragraph)

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