Overall, the traffic light provides aid for citizens and companies in the amount of more than 65 billion euros to cushion the sharp rise in energy prices. The package is twice as big as the first two together, said Chancellor Olaf Scholz (SPD). “The third relief package is huge. It’s a lot that we’re moving and it’s necessary,” said Scholz.
- Direct payments: Pensioners should receive a one-time payment of 300 euros, which corresponds to a relief of six billion euros. Students receive a one-time fee of 200 euros.
- Relief for energy prices: In order to relieve households of electricity prices, an electricity price brake will be introduced and the increase in network charges will be curbed. Scholz announced that this would be a “dramatic relief”.
- Skimming off chance profits: The federal government wants to finance this by skimming off “additional profits” from companies. To this end, the coalition envisages a “revenue cap for power generation systems with a low cost basis”. It is explicitly not a classic “excess profit tax”. According to Scholz, the excessive profits “should be skimmed off, as is the case with the EEG surcharge, only vice versa”.
- Lower CO2 price: In order to further relieve the burden on citizens and companies, the planned increase in the CO2 price of five euros per ton in fuel emissions trading on January 1, 2023 will be postponed by one year.
- Higher child benefit: In order to support families, child benefit will be increased by 18 euros on January 1, 2023, above and beyond what is constitutionally required. For a family with two children, that means 432 euros more per year for the next two years. The child supplement for single parents will also be increased again to 250 euros per month.
- Housing benefit reform: The entitlement to housing benefit is being expanded, increasing the group of beneficiaries from 700,000 to two million. Those entitled to housing benefit also receive a one-off heating subsidy of 415 euros.
- Relief for social security contributions: low-income workers will be relieved of social security contributions by EUR 1.3 billion. In the future, you will only have to pay full social security contributions from an income of 2000 euros. In addition, the so-called midi job limit, which rises from 1300 to 1600 euros in October, will be raised to 2000 euros from January 2023.
- Business Aid: The existing aid programs will be extended until the end of 2022. A new aid program will be launched for energy-intensive companies that cannot pass on the increase in their energy costs. The government also wants to support companies with investments. At the same time, the so-called peak compensation for energy-intensive companies will be extended by another year, as will the short-time work allowance until the end of 2022 and the reduced VAT rate for restaurateurs of seven percent.
- Successor to the nine-euro ticket: The heads of the governing parties have also agreed on a successor model for the nine-euro ticket. The federal government wants to provide 1.5 billion euros annually for this.
In addition, the program includes a number of measures that had been planned for some time, such as the introduction of a “citizen’s allowance” to replace “Hartz IV” or the reduction of creeping tax increases.
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The dismantling of the secret tax increases was controversial within the coalition. As proposed by Finance Minister Christian Lindner (FDP), the tax rates will now be adjusted to inflation at the end of the year. As a result, certain tax rates only apply to higher incomes, which relieves all taxpayers. Exception: There will be no shift for those who earn more than 277,000 euros and thus pay the “rich tax rate” of 45 percent.
However, Lindner was able to get the tax rates adjusted at the end of the year to the actual inflation and not to the current one. Due to the high price increases, this should save taxpayers an additional several billion euros. So far, Lindner had estimated the relief at twelve billion euros.
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The measures could be financed from the current budget, explained Lindner. For both years together, the budget will be charged with 32 billion euros. There is no need for a supplementary budget for 2022, and as planned, the federal government will be able to manage again from 2023 without using the exemption from the debt brake. Since the outbreak of the corona pandemic, the federal government had de facto suspended the debt brake.
There are two reasons why only half of the entire relief package of 65 billion euros will affect the budget: Firstly, the federal states and local authorities are also contributing to the costs of the package. Furthermore, the electricity price brake is financed by skimming off the additional profits outside the budget. This alone accounts for around twelve billion euros.
The federal government made no decision on the question of whether the service life of the three nuclear power plants, which are actually scheduled to go offline at the end of the year, will be extended. However, a decision is expected in the next few days.
Retirees and students were recently left empty-handed
The federal government had recently come under pressure to react to the ever-increasing prices and to provide further relief. It had already put together two relief packages totaling 30 billion euros earlier this year. However, pensioners and students got nothing from the energy price flat rate of 300 euros adopted in the second relief package, while high earners received the flat rate, which led to considerable criticism.
“A positive aspect of the relief package is the recognizable effort to let price signals take effect, even if this was not sustained with gas.”
(Photo: dpa)
Relief from the second package, such as the so-called tank discount or the nine-euro ticket, also expired on September 1st without there being any follow-up regulations. Refueling and public transport have been significantly more expensive since the beginning of Monday. In addition, the economic situation has deteriorated further. In August, the inflation rate in Germany climbed to 7.9 percent. The Bundesbank even anticipates double-digit inflation rates over the course of the year.
In addition to food, energy in particular is becoming more and more expensive. Because Russia is curbing gas imports to Germany and has even stopped them altogether in the meantime, gas and electricity prices are rising to an unprecedented extent.
Many citizens suddenly have to pay three times as much for electricity and gas. In particular, those on lower incomes can hardly shoulder the additional burdens. Further support is therefore also a question of social cohesion, emphasized Chancellor Scholz.
The coalition leaders’ negotiations on the third relief package started late on Saturday and were described as “very intense” and “difficult” during the afternoon and evening. The coalition leaders came to the Chancellery at nine o’clock on Saturday. First, Chancellor Scholz (SPD), Economics Minister Robert Habeck (Greens) and Federal Finance Minister Christian Lindner (FDP) discussed in small groups.
The parties then deliberated separately for three hours. Also, in order to first read through the table template in peace, which the head of the Chancellery, Wolfgang Schmidt (SPD), had prepared for the coalition committee after telephone calls with the three government factions. The actual traffic light negotiations began around twelve o’clock – and lasted until six o’clock on Sunday morning. The traffic light was therefore unable to keep one promise: that the time of long night sessions under it is over.
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