Germany bets on tax relief, cheaper trains to combat energy crisis

Berlin, March 24 (AFP/APP): Germany’s coalition government unveiled a slew of measures Thursday to ease the burden from soaring petrol and heating bills, from a 300-euro ($330) energy subsidy to the “cheapest ever” public transport for 90 days.

The relief package — agreed after days of wrangling between Chancellor Olaf Scholz’s Social Democrats, the ecologist Greens and the liberal FDP — comes as Germany tries to reduce its reliance on Russian energy following Moscow’s invasion of Ukraine.

Finance Minister Christian Lindner said citizens and companies were struggling to cope with soaring energy costs.

The package of measures showed that the government would shield the country “from the negative impacts of the war”, while taking further steps to diversify energy sources, Lindner told reporters.

The relief includes a one-off 300-euro subsidy for taxpayers to help with rising energy bills, as well as a fuel tax cut of 30 cents per litre for petrol and 14 cents for diesel for three months.

To encourage commuters to ditch the car and opt for more climate-friendly alternatives, the government is offering 90 days of local public transport at nine euros per month.

“Taking the bus and train will probably never have been cheaper in Germany,” Green party co-leader Ricarda Lang told reporters.

Other measures include a 100 euro bonus per child and additional subsidies for low income households, on top of similar aid announced previously.
Lindner said it was unclear how much the relief package would cost as it partly depended on the take-up of the public transport scheme.

But he said it would be roughly the same as the first round of energy relief measures which mainly targeted low-income families and amounted to about 13 billion euros.

– Boycott –

Lindner plans to unveil an additional 2022 budget shortly to take into account the new borrowing needed to cushion the economic blow from the war in Ukraine.

The IfW think tank broadly welcomed the government’s push to mitigate the price shocks, particularly for poorer households, but warned that the fuel tax reduction “lowers the incentive to save energy”.

Germany’s Chambers of Industry and Commerce (DIHK) called the temporary tax cut a drop in the ocean, and said more targeted help was needed to support businesses.

“The historically high electricity and energy costs are threatening the survival of many German firms,” DIHK chief Peter Adrian said.
Germany has backed sweeping Western sanctions against Russia over its aggression against Ukraine.

But Germany has also faced criticism at home and abroad for refusing to boycott Russian oil and gas, a move Berlin fears could plunge Europe’s top economy into chaos.

Chancellor Scholz warned on Wednesday that abruptly stopping Russian imports would risk “hundreds of thousands of jobs”.

Before the Ukraine war, Germany imported 55 percent of its natural gas from Russia, half its coal and around 35 percent of its oil.

Germany’s government said Thursday it was considering stalling the phaseout of coal-fired power plants to ensure energy security and reduce gas usage.

It stressed however that the country would “ideally” stick to the goal of ditching coal by 2030.