German Bundestag approves $196 bn fund to fight energy crisis

Berlin, Oct 22 The German Bundestag, ot the lower house of Parliament, has approved a "defensive umbrella" against the energy crisis in the form of a 200-billion-euro ($196 billion) fund.

"This is good news for anyone looking at their utility costs with concern, and for trades and businesses," Chancellor Olaf Scholz said on Twitter late Friday.

The country's Economic Stabilization Fund (WSF), which was set up during the Covid-19 pandemic in 2020, will manage and distribute the state aid.

Measures to be taken with the fund include a cap on gas and electricity prices, as well as "aid for companies in difficulty due to the crisis", according to a statement issued by the Bundestag.

A commission of experts recently proposed a phased model for the implementation of the gas price brake.

As a first step, customers will receive a one-off payment for their heating in December this year.

Next, a gas and heat price brake would take effect for at least one year from March 2023, capping at 80 per cent of average past consumption.

"The challenges in the winter of 2023/24 will be at least as great as they are this winter," the Ministry of Economic Affairs and Climate Action (BMWK) said earlier this week.

Although several European member states including Austria and France have been capping energy prices for some time, some of the financially weaker countries have criticized the German plans.

However, Scholz said that the 200 billion euro budget for the measures is appropriate, considering the size of the German economy.

"Our decisions are within the framework of what others are doing in Europe."

Driven by soaring energy prices, inflation in Europe's largest economy has risen steadily since the start of the Russia-Ukraine war.

To cushion the impact of high inflation on consumers and the economy, Germany has previously presented relief packages totaling 95 billion euros.

Measures include short-term financial support to pay heating bills during winter, as well as a general increase in welfare payments.

Despite the inflation relief expenditures, Germany is aiming to return to a balanced budget next year.

Therefore, it will apply the so-called debt brake, which prevents new borrowing for the first time since 2020.