German government’s ‘relief package’ means billions for companies and pay cuts for workers
On Sunday, the German coalition government presented its so-called “relief package”. It includes the clear statement that the government will pursue confrontation with Russia at all costs and shift the burden of war onto the people. As big companies continue to receive new financial aid, despite billions in profits pocketed, workers, retirees and students face drastic income losses.
When presenting the relief plan, the leaders of the “traffic light coalition” – the Social Democratic Party (SPD), the Liberal Democratic Party (FDP) and the Greens – remained extremely vague, refusing to provide concrete numbers. The alleged total amount of €65 billion was not broken down between the different measures and was based on mere estimates. According to Finance Minister Christian Lindner, the measures will only weigh on the federal budget in 2022 and 2023 by an additional 32 billion euros.
Much of this money will likely go to businesses and corporations. All business aid would be extended until December 31, according to the coalition partners‘ joint document. In addition, “energy-intensive businesses” would be supported, “sustainable businesses” would be stabilized and private housing companies, which have made record profits at the expense of tenants in recent years, would benefit from development loans. In addition, there must be financial support for “efficiency and substitution measures” to enable companies to become less dependent on natural gas imports.
While corporations will receive further gifts worth billions, the fabulous profits of many big corporations remain untouched. Companies listed on the German Dax index alone increased their profits by 21% in the first quarter of the year. The skimming of the “windfall profits” of energy producers, announced by the coalition in the “relief package”, will not change anything.
This measure only slightly reduces the billions given to energy companies on the backs of consumers for months. Electricity prices in the EU are not regulated by the market but are always based on the power stations that produce the most expensive electricity. Since gas-fired power generation has become very expensive, electricity costs are rising disproportionately. All other electricity generators – those using wind, nuclear, coal, etc. – can sell their electricity at these exorbitant prices, even if they have not seen their production costs increase accordingly.
The government has now announced that it will retain at least some of these donations and use them to reduce electricity prices, which were previously driven up by the same donations. In doing so, it left the scope of skimming and the amount of the electricity price cap completely open, referring only to the fact that this had to be decided at European level. But even if the full “windfall profits” were taken and passed on to consumers, which is highly unlikely, households would still face market-based electricity price increases.
A similar social attack disguised as relief is behind the reduction of the VAT (sales tax) on natural gas from 19% to 7%. This measure was decided on a long time ago and will come into force on October 1, but has now just been added to the package in order to artificially increase its volume. Indeed, economists expect that the reduction alone will cost the federal budget 14 billion euros, or almost half the volume of the package.
However, this money will not reach consumers. Indeed, the reduction does not even compensate for the cost of the gas surcharge, which the coalition adopted in August and which obliges households to pay an additional 2.4 cents per kilowatt hour, which flows directly into the bank accounts of energy companies in one billion euros. Not to mention the further huge increase in natural gas prices, which since Friday alone have risen another 30%.
At the same time, the incomes of workers, retirees and students are being decimated not only by soaring energy prices, but also by rapidly rising rents and hyperinflation of food prices. Even according to official statistics, food prices rose 14% in July compared to the same period last year.
The minimal relief that the federal government’s package has decided for these groups in no way compensates for this, but is merely incidental to the extreme bottom-up redistribution that the government and corporations are currently organizing.
The government, for example, cited the transformation of “Unemployment benefit II” into “citizen income” from January 1, 2023. However, this too had been decided a long time ago and is only intended to rig the package. Part of this change is the increase in the standard rate from €449 to “approximately €500”.
This increase of “about 11%” is “at best a bad joke”, as the managing director of the charity Paritätischer Wohlfahrtsverband (Parity Protection Association), Ulrich Schneider, said. If we include the last increase in 2022 of only 0.6%, the result is an annual increase of only 5.8%, which is well below the increase in the cost of living.
The increase in family allowances is even worse. These will be increased next year by just €18 or 8.8% to €222. However, this is the first increase since 2019, which translates to an annualized increase of just 2.9%. As the increase only applies to the first two children, a family of six receives an annual increase of only 1.4%!
Even the one-off payments for students and pensioners of €200 and €300, as well as the reform of housing benefits decided on long ago, will not change the dire conditions that the coalition itself has created. The nine-euro ticket, allowing travel for a month on local and regional transport, which offered at least some mobility to the most modest classes, will be abolished and replaced, subject to the approval of the federal states, by a ticket from 49 to 69 €. , which, according to surveys, would be used by only 5 instead of 67% of the population.
An important element of the “relief package” is the “concerted action” mentioned in point 10. This refers to the government working closely with unions and big business to impose real wage cuts on workers. In particular, it aims to prevent workers from winning the inflation-compensating raises that are baked into base rates in this year’s many wage disputes.
Instead, unions have pledged to keep workers quiet with one-off payments that will not be included in base pay scales. In this way, real wages are severely reduced and profits are further pushed up, while workers receive only a small level of compensation for this year. The government now wants to support this by exempting these one-off payments of up to €3,000 from taxes and levies – in other words, it is subsidizing real wage reductions.
The 32 billion euros that Lindner estimates these measures will cost remain in the “previous budgetary plans of the federal government”, according to the Minister of Finance. In other words, the money, most of which will benefit large corporations, will be saved elsewhere. The federal government has not specified which areas it is, but the massive increase in defense spending, while simultaneously cutting health and education, has long been decided.
The “relief package” is another step of the coalition to militarize the whole of society and subordinate it to its policy of war. Having systematically provoked Putin’s reactionary invasion of Ukraine, he now wants to use it to inflict a military defeat on Russia and place the country, with its vast mineral resources, under his own control.
The German government wants to become “independent of Russian gas”, as Chancellor Scholz said when announcing the package, in order to be able to push this confrontation further. Soaring prices are convenient because they force the population to save energy and thus guarantee supply for industry.
The ruthlessness and disregard for democratic rights with which the government is proceeding in this regard was made clear by Green Foreign Minister Annalena Baerbock at a conference in Prague last Wednesday. Speaking there about price hikes and the coming winter, she said she would continue the confrontation with Russia, “no matter what my German constituents think.” Even before that, she had promised to support the Ukrainian government until Crimea was also under her control, that is, until Russia was defeated militarily.
But it is not only the costs of this war and the insane costs of rearmament that are passed on to the population. The war abroad also serves the ruling class for a war at home. Like the coronavirus pandemic, it is using the war in Ukraine to wage a fabulous orgy of enrichment at the top of society. The government’s “relief package” is further accelerating this process, relying on close cooperation with business and trade unions.
To repel these attacks and defend their wages, workers must organize independently of unions and pro-capitalist parties in independent rank-and-file action committees united in the International Workers Alliance of Rank-and-File Committees (IWA- RFCs). They must link the fight against inflation and the theft of their salaries to the fight against war and its root, capitalism. The Sozialistische Gleichheitspartei (Socialist Equality Party) and its sister parties of the Fourth International around the world defend this perspective.