Cheaper petrol, extra cash to help Germans amid soaring energy costs

The moon rises as electricians work atop a power pole near the lignite power plant of Neurath of German energy supplier and utility RWE, near Rommerskirchen
FILE PHOTO: The moon rises as electricians work atop a power pole near the lignite power plant of Neurath of German energy supplier and utility RWE, near Rommerskirchen north-west of Cologne, Germany, February 5, 2020. REUTERS/Wolfgang Rattay

March 24, 2022

By Zuzanna Szymanska and Joseph Nasr

BERLIN (Reuters) -German workers and families will receive extra cash, cheaper petrol and cut-price public transport tickets to help them shoulder soaring power and heating costs after Russia’s invasion of Ukraine, Germany’s ruling coalition said on Thursday.

The deal between Chancellor Olaf Scholz’s Social Democrats (SPD), the ecological Greens and the pro-business Free Democrats (FDP), struck after talks that ran deep into the night, should ease tensions over how to respond to ballooning energy costs that are squeezing households and companies.

Finance Minister Christian Lindner said the volume of the planned measures should be similar to a first package of tax relief agreed last month, which he most recently said was worth 16 billion euros ($17.6 billion).

“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,” Lindner said.

Under the agreement, workers who pay income tax will receive a one-off energy price allowance of 300 euros ($330) as a supplement to their salaries. In addition, families will receive a one-time bonus of 100 euros per child, which doubles for low-income families.

The price of public transport tickets will be slashed to 9 euros a month for three months. The tax on fuel will be reduced to the European minimum rate for three months, which Lindner said should cut prices at pumps by 30 euro cents for petrol and by 14 cents for diesel.

Carsten Brzeski, chief economist at ING, said the package was a good start but would not be enough to absorb the economic impact of high prices as it does not include any measures to support companies.

“I’m afraid we won’t be able to avoid this topic over the next few weeks,” he said.

The package agreed by the coalition parties also includes measures to reduce Germany’s dependence on Russian gas and to reduce energy consumption, for instance by boosting funding for the construction of energy-efficient buildings.

The costs of the package of measures will be covered in a supplementary budget for this year to be unveiled next month, which will also include funding for humanitarian assistance to Ukrainian refugees and upgrading the German armed forces.

(Reporting by Zuzanna Szymanska Editing by Joseph Nasr and Nick Macfie)