On Wednesday, Germany put the finishing touches on an energy value cap, the cornerstone of a large €200 billion ($198 billion) package for families and emerging-cost businesses.
“Immediate assistance is on the way!” Chancellor Olaf Scholz said on Twitter that he has gone ahead with his plans despite complaints from European partners.
Major intervention in the energy market is considered mandatory for consumers at a time when Europe’s largest economy is entering recession and inflation has exceeded 10%.
According to a government position paper, the value of a percentage of typical household and business intake will be capped at below-market values.
For gas, 25,000 large companies as well as some 2,000 hospitals and schools will benefit from the cap from January 1 next year as part of the plans.
Households and small businesses will likely have to wait until March 1 at the latest for the price brake to take effect.
Policymakers will “seek” relief retroactively from February 2023.
A value cap will also apply to electricity from the start of the new year in January, and the measures are expected to last until the end of April 2024.
While the cap for small consumers will take effect later, the government will take care of household heating costs in December.
For households, the value of a kilowatt-hour of fuel will be capped at 12 cents up to 80% of their same previous consumption.
The same unit of fuel ultimately costs taxpayers 18. 6 cents, according to the Check 24 price comparison.
In total, accompanying measures can save a one-person family a typical fuel intake of 5,000 kWh, about 264 euros per year, the site estimates.
The partial value cap was designed as “energy-saving incentives” despite falling value for consumers, according to the government document.
Scholz will meet with prime ministers later Wednesday to finalize the plan’s main points.
Before the meeting, some regional leaders suggested that the federal government put the family fuel limit in place earlier.
“People want reliable coverage instead of higher costs, especially the bloodless months of January and February, when they use heating intensively,” Hendrik Wuest, regional director of North Rhine-Westphalia, told Der Spiegel magazine.
Germany, which has long relied on Moscow for energy imports, has been hit hard by high costs since the invasion of Ukraine and the cut in supply.
Although Germany’s economy grew 0. 3% between July and September, top analysts still expect the country to fall into recession as electricity prices reduce production.
Companies asking the government welcomed the plans.
The price cap measures “create some certainty while also allaying concerns,” industry forum BDI said on Monday ahead of the final deal.
Berlin’s grand plan for its economy has altered the feathers of European partners who would have liked a not unusual solution.
They feared that the most indebted EU countries could wipe out Germany’s spending, while the plan could only have effects on their own energy costs.
Germany’s energy value shield will be partly financed through new loans through an economic stabilization fund created by the coronavirus pandemic.
Berlin also intends to fund the cap by extracting some of the providential profits made through power corporations as they have risen.