Germany announced on October 10th that it intended to quickly put into action a 96 billion euro ($93 billion) strategy to relieve consumer pressure from skyrocketing gas prices after receiving warnings that the supply situation going into winter remained severe even with full reserves.
Berlin stated that it was trying to implement the commission’s recommendations to offer homes and small and medium-sized businesses a one-time payment equivalent to one month’s gas bill this year and a system to regulate prices beginning in March.
According to Michael Vassiliadis, leader of the union IG BCE and one of the commission’s specialists, the supply position remains tight despite the occupied storage facilities, adding that the panel anticipated their strategy would reduce inflation. If approved, a 200 billion euro relief package would pay for the plan. The administration of Chancellor Olaf Scholz made an announcement last month to lessen the effects of energy prices on the biggest economy in Europe. According to experts, the economy has to cut usage by a fifth to get through the winter and even beyond without resorting to rationing.
German inflation increased to 10.9% in September, its worst level in more than 25 years, fueled by rising energy prices, putting pressure on Scholz to solve a cost-of-living dilemma made worse because of Russia’s invasion of Ukraine.
With supplies from Russia, which formerly provided 40% of Europe’s needs, plunging and gas prices skyrocketing, European Union states have been developing a variety of schemes. However, Germany has come under fire for pushing ahead with plans that less wealthy EU members cannot match.
The brake would reduce the cost of petrol to 12 cents on 80% of usage from March until the end of April 2024 under a second phase of Germany’s plan. From January 2023, a seven-cent price break will be applied to the procurement price for major industrial customers.
According to experts, the benefit of a one-time payment is that it offers quick assistance. The drawback is that it does not promote conserving energy.
As per the calculations by comparison website Verivox, the brake plan would result in a 41% decrease in family gas bills. Thorsten Storck, an energy specialist at Verivox, stated that despite this, households are facing an extremely expensive winter because the majority of the alleviation will not take full effect until next March.
The plan was approved by the VCI Chemical Industry Association.
In a statement, VCI Managing Director Wolfgang Grosse Entrup called for an electricity price break and stated, the gas price curb is a very crucial first step that provides many companies back some hope that they can survive the crisis.