Posted Sep 29, 2022, 6:59 PM
After a decade of rigor, Germany is drawing heavily on its financial reserves to try to protect its prosperity. Not content with having already mobilized 95 billion euros since the start of the war in Ukraine, Olaf Scholz announced on Thursday the provision of 200 billion euros in additional credits. This envelope will make it possible both to cap energy prices which threaten the purchasing power of households and to support the energy companies most dependent on Russian gas.
“We find ourselves in an energy war whose objective is to ruin decades of work in the middle class, crafts and industry. We cannot accept it. Our response to Putin is crystal clear: our economy is strong and we are using that strength,” said Liberal Finance Minister Christian Lindner. To do this, the government will use the structure of the Economic Stabilization Fund which was created to support businesses during the Covid pandemic.
“A Shield of Defense”
“This double dose” (of 95 and 200 billion euros) must finance the capping of gas prices until the spring of 2024, explains Olaf Scholz. Renamed “defence shield”, the fund will finance the reduction of the load of the energy companies most dependent on Russian gas, which Moscow has stopped delivering. It will replace the controversial gas tax which was due to come into force on 1er october.
This fund will also provide the cash necessary to finance the capping of electricity prices while waiting for the contribution on exceptional profits to be put in place. It will finally be able to recapitalize energy companies in difficulty, such as VNG, which could be subject to nationalization like Uniper.
The government thus hopes to slow inflation, which passed the 10% threshold in September. “We are facing an economic and social crisis”, underlined the Minister of Economy Robert Habeck. The signal is all the more important for the coalition as regional elections will take place in Lower Saxony in ten days, which will put the SPD and the CDU neck and neck.
Christian Lindner saves face
It is also a question of coaxing the heads of the Länder ahead of their meeting with the Chancellor next Tuesday. They must give the green light to the latest aid package of 65 billion euros presented at the beginning of the month. But its financing requires a participation of twenty billion euros on their part. They are offended at having been presented with a fait accompli, but the energy price cap they were calling for should end up convincing them.
Finally, this instrument allows Christian Lindner to respect on paper his commitment to reinstate the debt brake next year. Unlike a budget envelope, the fund can only be used within its defined expenditure framework. The minister can thus hope to limit the creativity of his social-democratic and ecologist partners. “It is by no means an expansive fiscal policy like in Great Britain,” he insists.
Christian Lindner had however already used this sleight of hand at the end of last year, by adding 60 billion credits to the energy and climate fund. The Christian Democrats of the CDU-CSU filed a complaint before the Karlsruhe Court against this first operation, but the minister assures us that their complaint is unfounded because the consequences of the pandemic legitimized this extrabudgetary debt. Christian Lindner hopes to repeat the maneuver a second time.
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