In September, inflation in Germany jumped at 10 % over a year, the highest value recorded since 1951.
Le Monde with AFP
While the energy crisis lasts, Germany will unlock up to an additional 200 billion euros to cap the prices of gas and electricity which lead its economy and the purchasing power of households, announced Thursday, September 29, Chancellor Olaf Scholz. In September, inflation in Germany jumped at 10 % over a year, the highest value recorded since 1951, according to provisional figures published on the same day.
“Price must drop (…), the German government will do everything to lower them” both for households and for businesses, he hammered. The details of the price ceiling system, claimed for weeks by companies taken by the throat, must still be refined and the date of entry into force of the measure is not yet known.
decided after weeks of negotiations within the coalition, this “pricing shield” is not a first in the European Union, faced with an unprecedented energy crisis for 50 years. Several member countries, such as France and Spain, already apply a ceiling at energy prices.
“A clear response to Putin”
“We are in an energy war for prosperity and freedom,” added the Minister of Finance Christian Lindner, stressing that the situation had worsened “after the sabotage by unknown authors” of the pipelines North Stream in the Baltic Sea.
“This energy war aims to destroy a large part of what people have personally built for decades,” said the minister. “We cannot accept this and we defend ourselves,” he added, presenting the new aid measures as “a clear response to Putin”.
Germany pays at high prices for its dependence on Russian gas, which represented 55 % of its gas imports before the war in Ukraine. It must now find other sources of supply on the cash market where prices have exploded. The country will switch to the recession next year, predict economists and the energy crisis will leave traces.
“The prices of gas should remain well above the levels before the crisis. This will result in a sustainable loss of prosperity” for the first European economy, warned the main economic institutes of the country in their forecasts of ‘Fall unveiled Thursday. The “shield” announced by Berlin is added to previous support measures already totaling around 100 billion euros.
The cap announced Thursday should be funded by the stabilization fund for the economy, created during the pandemic to support companies and which will be equipped with additional means. This exceptional public fund, which is funded via specific credits lines and therefore not recognized in annual budgetary expenses, will allow the government to stay in the nails of its financial commitments.
Germany wants to return next year to the rule of “debt brake”, a constitutional principle which forbids it to go into debt to more than 0.35 % of GDP per year and which was suspended Since 2020 due to the pandemic. If the budgetary rule is officially respected, the invoice for the energy crisis is already considerable for the Scholz government which has also initiated nationalization, or taken control, of several companies in the energy sector threatened with bankruptcy.
By announcing the energy price cap on Thursday, Berlin took the opportunity to bury a controversial gas surcharge project, which would have been weighing an additional weight on households and businesses in the country. Supposed to come into force on 1 e e er October, this surcharge was intended to support companies in the gas sector by passing out part of the vertiginous increase in their costs on consumers. But since her announcement this summer, she had aroused an outcry this summer, and appeared more and more obsolete after the nationalization in September of Uniper, the first German importer of Russian gas.