What does Germany's 65-billion-euro relief package mean for you?
The German federal government has signed off on a new 65-billion-euro relief package, designed to support households struggling with the soaring cost of energy and other basic necessities. Here’s a look at what the new package contains, and who benefits.
German government unveils new energy relief package
“We will get through this winter,” German Chancellor Olaf Scholz said on Sunday, announcing that his government had agreed to a multi-billion-euro plan to cushion households and families in Germany from the rising cost of living, as the inflation rate soars and the Nord Stream 1 shutdown places additional pressure on the energy market.
Telling reporters that he was “very aware” that people were beginning to struggle with rising prices, Scholz promised that the government would step in to help. “We will get through this difficult period as a country,” he said. “We take these concerns very, very seriously.”
What are the key measures of the new German relief package?
The new relief package is the third announced by the government since the invasion of Ukraine sparked an energy crisis across Europe. The previous packages, totalling around 30 billion euros, included a tax cut on petrol and diesel, heavily discounted public transport under the 9-euro ticket scheme, and a 300-euro energy relief payment for all workers.
But with many of these measures having come to an end in September, the government has come under new pressure to provide additional relief, especially to population groups that are yet to be reached by previous interventions. Here’s a brief overview of the new package’s key measures:
Electricity price brake
The coalition is planning on introducing an electricity price brake for “basic consumption”. In a nutshell, this means that customers - including both households and small and medium-sized businesses - would pay a discounted rate for electricity, up to a certain consumption limit, after which prices would not be capped.
Energy windfall tax
After debating, rejecting, and then reconsidering the policy several times over, Germany has finally decided that it wants to implement a so-called energy windfall tax - a tax designed to stop energy companies from profiting from the ongoing energy crisis by taking a cut of their profits.
The skimming off of windfall profits would create “financial headroom that should be used specifically to relieve the burden for consumers in Europe,” the government policy paper states, while Finance Minister Christian Lindner estimated that it could potentially bring “double-digit billions” of euros in relief. Germany plans to work with the EU on this policy, but is prepared to implement it either way, Economics Minister Robert Habeck said.
CO2 tax hike to be postponed
The CO2 tax was due to be increased by 5 euros per tonne from January 1, 2023. This will now be postponed to 2024, meaning the tax will remain at 30 euros per tonne of carbon dioxide.
9-euro ticket follow-up
The 9-euro ticket scheme came to an end this month, but the government has committed itself to supporting a follow-up scheme. The federal government announced on Sunday that it would set aside 1,5 billion euros to go towards another discount scheme for public transport in Germany, so long as the federal states contribute at least the same amount. The new ticket, which would be valid on regional transport nationwide, would cost somewhere between 49 and 69 euros per month.
Home allowance extended
The coalition government also agreed to extend the 5-euro per day home working rebate indefinitely. The scheme, which was due to expire at the end of 2022, allows people who work from home to deduct 5 euros per day (up to a maximum of 600 euros) on their annual tax return.
One-off relief payments for pensioners and students
Workers in Germany have already been promised a 300-euro one-off payment in September, but now the federal government is extending financial support to other population groups. Pensioners in Germany will receive a 300-euro payment in December, most likely along with their regular pension benefit, while people studying in Germany will receive 200 euros. It’s not yet clear how the lump sum will be paid out to students.
Child benefits to go up
Child benefits in Germany will increase next year. From January 1, 2023, parents will receive an additional 18 euros per month for each of their first three children. The child allowance will also be increased by 250 euros from January 1.
Heating allowance for housing benefit recipients
Anyone receiving housing benefit in Germany will get extra support. Between September and December 2022, another one-off heating cost allowance will be paid out. A one-person household will receive a one-off payment of 415 euros, while bigger households will receive more.
After this, the housing allowance will be reformed to contain a permanent climate component and a heating cost component to better cushion recipients from future energy price rises. The government will also make some changes to the eligibility criteria so that in future 2 million more people will receive the benefit.
Protection from supply cut-off
To further soothe the concerns of those struggling with bills, the government has also pledged that no one will be disconnected from electricity or gas if they are unable to pay.
Higher contribution threshold for mid-jobbers
Finally, the limit above which people with so-called midi-jobs have to make contributions to social security will be raised to 2.000 euros in 2023, allowing people on lower incomes to keep a bigger portion of their salaries.
More measures to be announced
Additional relief measures will likely be announced in the coming days and weeks as the Federal Finance Ministry puts together its 2023 budget.