Anti-shock billions: how Germany softens the rise in prices for gas and electricity to citizens

Ekaterina Maksimova, Natalia Seybil

Unprecedented subsidies or forced debut

In total, Germany allocates 200 billion euros to overcome the energy crisis. Already in December, both households and entrepreneurs will receive part of this money from the state. Such a measure will allow ordinary citizens of the country to pay at a reduced price up to 80% of the gas they need. In modern Russia, for Russian consumers, such "gifts" have never even been discussed.

Undoubtedly, in Germany, which is considered the richest country in the EU, a serious economic crisis is raging. "And it's not about the lack of gas, fuel oil, electricity - it's about high energy prices. The prices of both gas and electricity have jumped up so much that the poor part of the population in Germany is not able to pay for them. Therefore, the government for the first time took huge measures subsidies - in the amount of 200 billion euros," German journalist and political scientist Alexander Rahr told NI.

Doctor of Economic Sciences, Professor, Chief Researcher at the Institute of Economics of the Russian Academy of Sciences Igor Nikolaev also calls the amount of 200 billion significant. "What is called, they were not modest and were not greedy," he noted.

Alexander Frolov , deputy general director of the National Energy Institute, also agrees that these are unprecedented and debut support measures . At the same time, the expert reminds that electricity prices in Germany are not only the highest in Europe. As of March 2023, Germany ranks second in the world in terms of the high cost of electricity.

“Back in 2009, when the third energy package was being adopted, German citizens were promised that with the implementation of the new strategy, their utility bills would be reduced by about half. Instead, by the beginning of 2021, bills had tripled. And for the population to a greater extent. Electricity and it used to be one of the most expensive in the world, and after the crisis, the price went up even more. Moreover, the price of gas went up. And electricity cannot ignore the prices of gas, coal and other energy resources," reminds Alexander Frolov.

Aleksey Belogoriev , Deputy Director for Energy at the Institute of Energy and Finance, noted one more point: the EU countries "left" subsidizing the consumption of fossil fuels to the last. The current decision, of course, is not a betrayal of "green" European values, but definitely a departure from a long-standing policy.

How the Germans will be given billions

In December, state subsidies will be received by 20 million Germans whose households are heated by gas.

“After a ticket for 9 euros for the entire population of Germany, this is perhaps the only measure that can help the population, every person, regardless of income,” says journalist Elena Fedorova (Germany).

She clarified that the Germans pay utility bills in advance, and at the end of the year the real energy consumption is calculated. And the December recalculation was supposed to be the most unpleasant in recent years: gas prices in Germany have increased several times this year. If at the end of 2021 the price per kW was 3 or 4 cents, now the price per kW will be about 18 cents. This is actually a sixfold increase.

"Criticists of the government say that even this measure will not be enough, although in terms of households, heating costs in December, since December is one of the coldest months of the year, are about 200 - 400 euros. For houses larger than 200 - 300 square meters, this amount can reach up to 900 euros.In fact, by paying subsidies in December, the government will make life much easier for the population," Elena Fedorova believes.

From January 2023, "gifts" from the state, apparently, will end.

"And this causes a heated discussion that is currently going on between the prime minister of the federal states and the Bundes government, because people, having received bills in January, will not be happy. Any democratic state will immediately feel the wrath of its citizens in the form of demonstrations and rallies. Nobody wants to allow this However, the plan is to introduce a ceiling on gas prices in March, so that 80% of the gas price will be compared with last year's price.If citizens heat more, they will pay only 20% of the energy consumed at current prices.80% will be covered by the state ”, - said Elena Fedorova.

The German economy is shattered

Aleksey Belogoryev believes that the German authorities are now really more busy solving social and political problems.

“Obviously, due to the sharp rise in energy prices, there is great dissatisfaction on the part of the population. And the governments of all EU countries have to do something about this, somehow reckon with it. Reducing social discontent is the first task. And the second is an attempt to keep energy-intensive industries afloat so as not to lose global competition, so that these industries do not massively move to other countries, to the United States," Aleksey Belogoryev explained.

The expert recalls that the most energy-intensive and gas-intensive German industries - the chemical industry, metallurgy, and the production of building materials - suffered the most.

"They are highly dependent on the price of gas in terms of their total production costs. Therefore, industrial enterprises have most of all reduced the consumption of blue fuel this year, especially over the past month. And this was largely done by artificially reducing production, including by stopping part of the production," Belogoriev specified.

Alexander Rahr , in turn, recalls that in recent years the energy-intensive industry in Germany has switched from using coal to more environmentally friendly gas.

Elena Fedorova adds that small and medium-sized businesses can count on state subsidies in December - all small cafes, hairdressers, shops.

As for large enterprises, various measures are already being introduced for them. For example, the UNIPER concern, which was the first to suffer from the increase in gas prices. The German government actually became the majority shareholder of this concern.

“Large enterprises will be helped in the same way as small ones. Whether it will be from 200 billion is still an open question. They will probably use this source of financing too, but I think there are other measures that will be applied to large industry , because the chemical industry is suffering very much. BASF has already announced that they are transferring half of their production to Germany by 2030 due to high energy costs, "says Elena Fedorova.

And he adds that there are a lot of problems that are still being solved according to the “Doing by learning” principle, that is, as events unfold, new and new measures are used. And this is very, very difficult for Germany.

“There will be nothing simple in the way it looks. Everything is done very difficult, everything goes through very complex coordination procedures, because it is also a government consisting of three different parties, there is also the opposition of the CDU-CSU, which is dissatisfied with many measures, taken by the government. In fact, these public discussions do not stop. This is not the end at all," Elena concluded.

Will the help plan work?

Alexander Frolov believes that the German authorities were late with their package of assistance to business and the population. "Something like this should have been done a year ago, until the industry began to crumble, the demand for gas and electricity collapsed. In general, until all this began to put pressure on the foundation of the country's economy. But then it was assumed that by April 2022 years, gas prices will normalize and go down, but the forecast came true exactly the opposite," says Frolov.

In his opinion, the promised subsidies do not solve the set of problems that European consumers face against the backdrop of the global energy crisis, and which has not yet ended.

“About 10-15% of the current volume of gas enters the European market now only because the highest world prices for “blue fuel” have developed there. If China removes its anti-COVID restrictions and starts increasing gas consumption, plus a number of other factors, then these volumes may well leave the European market. After that, prices will skyrocket and a price war will begin between Europe and Asia. - Alexander Frolov argues. - What the German leadership is now offering, all these subsidies, this, of course, is not a palliative, but still attempts solve fundamental problems by applying alcohol dressings to lacerated wounds and covering them with brilliant green, although this wound should be sewn up.

Alexander Rahr adds that the costs of fighting the energy crisis are forcing the German government to continue to accumulate astronomical debts, and problems with Europe's gas supply remain unresolved.

"Germany is looking forward to buying liquefied gas from the United States and the Gulf countries and additional natural gas flows from Azerbaijan, Algeria and Norway. But all experts also say that it will not be possible to completely abandon Russian gas in the coming years," the political scientist adds.

Igor Nikolaev points out that the impulse of the German authorities will provoke inflation.

"This will not stop the sharp rise in prices, but it will compensate for the inflationary costs on the part of consumers. By allocating money, it turns out that we maintain effective demand, despite the fact that prices have risen. That is, this is to some extent a pro-inflationary decision. If if demand fell sharply, then prices would stop rising. And since they buy at such prices, it means that it’s okay that prices have risen so much. But you can’t fight inflation either! It is necessary to find a balance so that for consumers it is not very burdensome and at the same time, the costs must be compensated," Nikolaev believes.

Experts continue to insist that gas reserves cannot be enough to cover the entire winter demand. Fuel selection should be combined with large and stable import supplies. Prior to the start of the NVO, the Russian giant Gazprom covered the needs of the European Union by 35-37%, which is more than 140 billion cubic meters per year, while the EU needs 400-420 billion cubic meters of gas per year.