"Defense shield" of up to 200 billion euros: Federal government agrees on gas price brake - and waives controversial surcharge

The federal government wants to dampen the rising gas prices in Germany with a gas price brake.

"Defense shield" of up to 200 billion euros: Federal government agrees on gas price brake - and waives controversial surcharge

The federal government wants to dampen the rising gas prices in Germany with a gas price brake. The government has agreed on a package of up to 200 billion euros. Financing is to be secured via the existing Economic and Stabilization Fund (WSF). In addition, the traffic light coalition overturns the controversial surcharge for all gas customers. Instead, tailor-made measures would be developed for the ailing gas importers Uniper, Sefe and VNG, according to a decision presented on Thursday by Chancellor Olaf Scholz (SPD), Economics Minister Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP).

The coalition partners had come under increasing pressure in recent days due to the lack of Russian gas supplies to Germany in the course of the Russian war of aggression in Ukraine. A gas surcharge was originally intended to protect large gas suppliers from insolvency. Among other things, however, there were fears that consumers would face enormous costs due to a surcharge.

"The prices have to go down," said Chancellor Olaf Scholz (SPD) at the press conference in Berlin. The federal government will do everything for this. This should help pensioners, families, craft businesses and industry to pay prices. The plans put the government in a position to waive the planned gas surcharge, said Scholz. "She is no longer needed."

Scholz described the planned state support for the energy supply and the planned price brakes as "double boom". He recalled his statement about previous state aid in the corona crisis that it was about getting out of the crisis with "boom". "You can say it's a double boom here," said Scholz. It is about reducing the prices for energy quickly and quickly for everyone.

The Chancellor noted that Russia was using its energy supplies as a weapon. At least since the damage to the pipelines in the Baltic Sea, one could say: "For the foreseeable future, gas will no longer be supplied from Russia."

Despite the abolition of the gas surcharge, VAT on the supply of gas is to be reduced as planned from October 1st. "The reduction in VAT (...) will be retained and will also be applied to district heating contracts," said Economics Minister Habeck. It is a further "measure of relief at this time when energy prices are so high for the citizens". From October 1st to March 31st, 2024, the VAT on gas should only be 7 instead of 19 percent. According to Habeck, the funds to finance the reduction are not included in the defense shield, which can cost up to 200 billion euros.

The gas levy, which was supposed to be levied from October 1st, will now be withdrawn by regulation, said Habeck. If consumers have already paid, they must be repaid.

Leading economic research institutes warned that a gas price brake could fuel the already high inflation. Such a brake is also criticized because, according to critics, there would then be less incentive to save the scarce gas. Because of the high proportion of imports, a reduction in the price of gas requires "massive subsidies, which in turn would of course pump new purchasing power into the private sector," said Stefan Kooths from the Kiel Institute for the World Economy at the presentation of the autumn report by the leading economic research institutes. This will once again fan the general economic upward pressure on prices.

The controversial gas levy, on the other hand, is better than its reputation. It's not just about saving the gas suppliers. By passing on the higher gas prices to the population more quickly, there is also an incentive for customers with old contracts to save on gas.

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