Germany agrees energy relief as Ukraine war drives prices up further

Germany's coalition government announced a package of measures on Thursday designed to help citizens shoulder the spiralling cost of living while reducing the country's energy dependence on Russia, reported dpa.

Since the Russian invasion of Ukraine began a month ago, energy and fuel prices have soared.

In terms of relief for the general German public, the three-way coalition agreed to pay out a one-off energy allowance of €300 to all employees subject to income tax, while fuel tax is to be reduced for three months in line with an EU minimum.

Families will receive a special additional benefit of €100 per child, and recipients of social benefits will get €100 each, on top of another €100 one-off payment already agreed earlier in the year.

In addition, the Social Democrats, the Greens and the pro-business Free Democrats plan to introduce a special discount on public transport, with a monthly ticket to cost €9.

The environmentalists in the German government had been pushing for measures to reduce the country's energy consumption rather than just subsidize it.

However, with Germany so dependent on Russia for its energy, the crisis in Ukraine has forced the centre-left coalition to make some difficult choices.

In their position paper, the parties raised the prospect of delaying the decommissioning of coal power plants, as the conflict in Ukraine prompts reconsideration of one of Berlin's cornerstone energy policies.

Germany has set a target of turning off all its coal-fired power stations by 2038 at the latest, although the three-way coalition would like to see the phase-out completed by 2030.

While that goal has not changed, the new position paper outlines the possible suspension of coal plant closures until further notice, pending a review by the Federal Network Agency.

"We want to reduce gas consumption in electricity generation in the short term by keeping coal-fired power plants on safety standby for longer if possible," the document says.

The Ukrainian leadership has urged Germany to turn off the taps to Russian gas to punish Moscow for its war - a tall order since Russian deliveries account for 55% of German gas imports.

In other announcements on energy policy, the German government said it planned to ensure that every newly installed heating system from January 1, 2024 would be powered by 65% renewable energy - a year earlier than the original target.

The coalition also promised to create a framework to help homeowners update their heating systems if they are more than 20 years old.

In announcing the measures, Finance Minister Chrisian Lindner said they combined energy independence, efficiency and support for citizens as Russia's war in Ukraine exacerbates the already-high cost of living.

"This should show the people of this country that we can be trusted to act in this crisis," Lindner said of the government, which succeeded Angela Merkel's grand coalition in December.

Even prior to the outbreak of war in Ukraine, the new German coalition had agreed in February to measures in response to spiralling energy bills.

This included abolishing a renewable electricity surcharge introduced under the German Renewable Energy Sources Act from July 1, rather than early 2023 as planned. The parties also decided to raise a long-distance commuter allowance in consumers' tax returns.