Putin and Energy in Winter Time
Between September 2021 and August, according to calculations by the Bruegel think tank, Germany allocated about 602 billion euros to tackle the energy crisis, which is the highest amount in the European Union.
Although, according to this think tank, this amount is relatively small at 17% of Germany’s GDP per capita. Currently, in terms of resources allocated to families and businesses, Germany ranks first, followed by Italy with 495 billion euros in second place.
When comparing the percentage relative to GDP per capita among the countries with the most performance, Greece and Lithuania, followed by Italy at around 28%, can be mentioned.
Additionally, France with 447 billion euros, equivalent to 18% of its GDP, and Spain with 273 billion euros, equivalent to about 23% of its GDP, are on this list. Finland can also be mentioned as another country that decided to allocate resources to electricity producers to adjust energy prices.
The Finnish government has offered loans and guarantees up to 10 billion euros to the country’s electricity companies to ensure their cash flow is sufficient. Finnish Prime Minister Sanna Marin announced at a press conference that the government provides these loans and guarantees on a case-by-case basis to companies whose continued operation is vital and necessary for society.
Additionally, Finnish Finance Minister Annika Saarikko stated at a press conference that the government wants to keep the electricity and its derivatives market calm in the future with this financial guarantee and ensure access to electricity in the country under any circumstances. Similarly, the Swedish government announced a similar action on a larger scale.
The End of Nord Stream
Chancellor Scholz announced that energy producers are exploiting the very high gas prices, which are indeed a determining factor in electricity prices. In Germany, as in many other European countries, people’s purchasing power is decreasing due to the skyrocketing energy prices and rising inflation rates.
For this reason, the German government announced that it has approved a support plan worth 65 billion euros to reduce the impact of rising energy prices on citizens’ lives.
This is the third intervention by the German government to help families and businesses to support them against rising energy costs. This aid package was introduced after Gazprom announced that it would not resume supply through the Nord Stream pipeline.
Two days after Gazprom’s announcement of not restarting through the Nord Stream gas pipeline, the parties forming Germany’s ruling coalition, the Greens, Liberals, and the Free Democratic Party, agreed on a support plan against the high cost of living.
This plan, valued at approximately 65 billion euros, aims to support millions of families in coping with the increase in electricity prices in a situation where Europe is caught in its most serious energy crisis in decades.
Chancellor Scholz announced that Berlin intends to help reduce household bills by using the excess profits of some energy companies that have benefited from the sudden rise in energy market prices. This means that the plan is mainly funded through a windfall tax on energy companies, which, according to Finance Minister Lindner, will guarantee double-digit billion euro revenue for the federal government.
In a document prepared after weeks of discussions among the three coalition parties, the German government notes that this aid requires significant additional costs in the federal budget. According to Bloomberg, the federal government will fund 40 billion euros of this plan, and the remaining will be covered by the Länder states and municipalities.
Scholz reassured his fellow citizens that Germany can face the winter and, despite the lack of gas supply from Russia, guarantees the country’s energy supply, which the economy heavily depends on.
Overcoming Winter with an Unreliable Partner
He told the press that Russia is no longer a reliable energy supplier, and we will overcome this winter. The federal government was prepared for this possibility from the beginning of the year and emphasized that thanks to the diversification of financial resources for energy supply and the reconstruction of energy with the country’s gas reserves, it can cope with prolonged Nord Stream gas pipeline outages.
Meanwhile, German Economy Minister Robert Habeck announced that the level of Germany’s gas storage facilities has exceeded 85%, a threshold the government aimed to reach by October 1 according to a pre-determined plan, but managed to achieve a month ahead of schedule. However, storage levels may decrease again.
According to Sebastian Bleschke, the director of the Association of Industrial Operators, storage facilities will continue to be filled as Germany currently receives more gas from Norway and the Netherlands. However, he noted that if Russian gas supply is permanently cut, the next target, filling 95% of reserves by November 1, will only be achieved with great effort.
Like many European countries, Germany is facing a serious escalating energy crisis that began after the war against Ukraine and international sanctions against Russia.
The German government has activated the second phase of the gas emergency plan in three levels and is considering abandoning various energy and environmental policies to create consequences and conditions, including extending the lifespan of nuclear and coal power plants.
The inflation rate rose to 7.9% in August, and according to the Bundesbank report, this figure could reach 10% by the end of the year, a number unprecedented since 1950. The rise in energy prices and Germany’s successive policy changes regarding Ukraine have created significant problems for the Scholz government, even reducing his popularity among German public opinion.
Four Major Actions of the Coalition Government
Among the main and significant actions approved by the ruling coalition, the following can be mentioned:
1. Payments for pensioners and students: On December 1, pensioners will receive a 300-euro allowance to pay their bills, and a 5 billion euro tax reduction will be applied for them in 2023. Students and trainees will also receive a 200-euro check. 2. Electricity price control: A fixed price is considered for final electricity consumption up to a certain consumption threshold.
3. A new ticket for local transport nationwide that replaces monthly tickets. The federal government intends to allocate 15 billion euros to national local transport, but this budget has not yet been approved by the Länder states. 4. Finally, the government wants to add 18 euros to the family allowance payment for the first and second children.
Other related articles on this topic can be found on Iran Gate for further reading.
- Russia, Europe, and China in the 2022 Energy Battle
- Moscow’s Battle with the Weapon of Energy
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