German expert commission presents 91 billion euro energy aid package

The German government should pay all gas bills for private households in December and subsidize residential and industrial gas prices for more than a year from the start of 2023, a commission of experts proposed on Monday.

The 21-member commission made up of leading economists, business and union representatives said the measures would cost around 91 billion euros.

The idea of ​​a gas price cap was unveiled at the end of last month by Chancellor Olaf Scholz as part of a €200 billion “safety shield” funded by new borrowing. It was the largest aid package passed by a European government since Russia’s invasion of Ukraine which drove up energy costs. But some EU member states said the move undermines efforts to forge a common approach on lower gas and electricity prices.

Asked whether the proposals harmed European unity, Michael Vassiliadis, leader of the IG BCE union and member of the commission, said: “We want a solution of solidarity for Europe, which Germany will part.”

“If we don’t give German tenants anything, Greek tenants won’t get anything either,” Vassiliadis added. “If we help German tenants, that does not mean that we do not want to help the inhabitants of [the rest of] Europe.”

Veronika Grimm, professor of economics at the University of Erlangen-Nuremberg, who is another member of the commission, said the plans reflected the “new normal” of significantly higher energy costs. He said he was proposing a two-stage relief package comprising €5 billion to cover the gas bills of all private households for December.

In the second stage, private households and small and medium-sized businesses would pay a subsidized price of 12 cents per kilowatt-hour for 80% of their gas consumption, for 14 months from March next year, with any gas consumption exceeding this level being invoiced at market prices. This amounts to a substantial state subsidy – gas currently costs 28.3 cents/kWh for new customers, up from 6.8 cents a year ago.

According to the German price comparison site Verivox, a family that consumes 20,000 kWh of gas currently faces a bill of €4,108 per year. If 80% of his consumption is capped at 12 cents, his gas bill would fall to €2,742, or a reduction of €1,366 per year.

The commission also proposed that industrial companies pay only 7 cents/kWh for 70% of their gas consumption from January next year, for 16 months.

Grimm said gas prices had skyrocketed since Russia’s invasion in February, with contracts being “increased across the board, sometimes to 20-25-30 cents/kWh from 7 cents originally.” .

Vassiliadis said the proposed proposals would serve the dual purpose of providing “effective protection” to consumers while preserving “the incentives to save [gas consumption]”.

The €91 billion figure includes €66 billion to cover the cost of subsidizing private gas bills for private households and small businesses and €25 billion for industry subsidies.

The price figure of 12 cents/kWh “is the price level we expect going forward,” Grimm said. “This ‘new normal’ will be much higher than the price level we had before Feb. 24, 2022” – the day Russia invaded Ukraine, says Siegfried Russwurm, head of business lobby BDI and another committee member.

James R. Rhodes