Germany to fast-track disputed €200 billion energy fund

Germany aims to fast-track a controversial plan to create a €200 billion energy fund to shield citizens and firms from historic price shocks, according to a draft law seen Friday by AFP.

German Chancellor Olaf Scholz
German Chancellor Olaf Scholz pictured at the entrance of the Chancellery in Berlin on September 23, 2022. Photo: Tobias SCHWARZ / AFP

Sources said the legislation, including caps on power prices, could be presented to the cabinet as early as Monday.

The draft warns that if gas and electricity prices continued to surge without state intervention, “production stoppages for energy-intensive companies must be expected”, leading to a “downward spiral of the German economy”.

READ ALSO: German government pledges to subsidise rising electricity bills

France and key members of the European Commission have voiced concern about a go-it-alone approach by Berlin.

They are calling for EU-wide solutions to the energy crunch, aggravated by war in Ukraine that has seen key supplier Russia turn off the gas taps.

Chancellor Olaf Scholz has defended the package against the criticism, citing the potentially crushing economic blow of energy shortages this winter.

READ ALSO: German cabinet approves €300 energy relief payment for pensioners

He has also stressed that the €200 billion fund to finance support measures would be spread out over a few years until 2024.

The €200 billion is also to be pumped into an economic stability fund outside the government’s main budget, allowing the government to stick to constitutional debt rules that limit public deficits.

The head of the German Chambers of Commerce and Industry, Peter Adrian, underlined the need for extraordinary measures to weather the crisis in Europe’s economic powerhouse.

“We are threatened with a loss of prosperity on a scale that was unimaginable until now,” he told the daily Rheinische Post, noting that German gas prices were about 10 times as high as those in the United States.

READ ALSO: Gas bills in Germany will remain high despite price cap, warns economist

“If we don’t get that under control in the short term, we’re going to have to say goodbye to a lot of companies and their employees before the end of the winter,” he said.

Germany, which has been highly dependent on imports of fossil fuels from Russia to meet its energy needs, has come under acute pressure as dwindling supplies from Moscow have stoked fuel prices.

The country expects to sink into a recession in 2023, leading economic institutes said last month, citing the impact of skyrocketing energy prices.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Germany snapping up Indian fuels amid Russia sanctions

German imports of refined oil products from India soared in the first seven months of the year, official data showed Tuesday, much of which was likely made using crude oil from sanctions-hit Russia.

Germany snapping up Indian fuels amid Russia sanctions

Germany bought 451 million euros’ ($480 million) worth of Indian petroleum products between January and July.

That was an increase of more than 1,100 percent on the €37 million spent over the same period a year earlier, national statistics agency Destatis said.

The 12-fold jump comes after India became a leading buyer of Russian crude in the wake of Moscow’s invasion of Ukraine in February 2022.

India’s fuel exports to Germany were “mainly gas oils used for the production of diesel or heating oil”, statistics agency Destatis said.

Destatis noted that these products were derived from crude oil and that according to the UN Comtrade database, “India has been importing large quantities of crude oil from Russia” since the start of the war.

Western countries have hit Russia with a slew of sanctions over the war, including a European Union embargo on seaborne oil deliveries from Russia.

The EU — along with its G7 partners — also agreed to a price cap of $60 per barrel for Russian crude exported to other parts of the world.

READ ALSO: OPINION: A winter energy crunch in Europe looks a distinct possibility

The measure has allowed India to snap up discounted crude from Russia before refining it and selling it to European customers.

While these sales are legal, critics say they amount to a backdoor route for Russian oil and undermine the impact of the sanctions, which are aimed at stripping Moscow of revenues to fund its war effort.

The EU’s foreign policy chief Josep Borrell acknowledged “the dilemma” in a blog post in May.

“We in the EU don’t buy Russian oil, but we buy the diesel obtained by refining this Russian oil somewhere else. This has the effect of circumventing our sanctions,” he wrote.

“All this does also raise moral issues,” he added.