Germany is putting up a "defensive umbrella" of up to 200 billion euros (196 billion U.S. dollars) to stabilize the country's economy during the energy crisis, Chancellor Olaf Scholz announced on Thursday.
The country's Economic Stabilization Fund (WSF), which was set up during the COVID-19 pandemic in 2020, will manage and distribute the state aid.
With the relaunch of the fund, Germany is also reacting to the changed gas supply situation with Russia, after leaks in the Nord Stream 1 and 2 pipelines led to an indefinite hiatus in flow.
"We are well prepared for this situation," said Scholz, adding that he expected there would be "no gas supplies from Russia in the foreseeable future."
Germany has actively sought new trade partners and extended coal and nuclear power generation since the start of the Russia-Ukraine conflict.
Two of Germany's three remaining nuclear power plants can still be operated in the first quarter of 2023, despite the planned nuclear phase-out at the end of this year.
Electricity and gas prices are to be capped, to ease the burden on consumers and the economy. Before the energy crisis, the government had already presented inflation relief packages worth 95 billion euros.
Also on Thursday, Germany's statistics authority announced that inflation had jumped to a new record of 10 percent in September. According to preliminary figures by the Federal Statistical Office, prices for energy rose particularly sharply, by 43.9 percent year-on-year.
Scholz also said that a much-criticized gas levy, which would have allowed utilities companies to pass on high energy costs to consumers, will now not be introduced. Instead, companies are to receive support directly, to avoid placing an additional financial burden on citizens.
Just before Scholz announced the stabilization fund, leading German economic institutes slashed their forecast for 2023. They are now expecting a recession of 0.4 percent, instead of the 3.1 percent growth previously forecast.
"This revision mainly reflects the extent of the energy crisis," the RWI Leibniz Institute for Economic Research, the Halle Institute for Economic Research (IWH), the Kiel Institute for the World Economy, and the ifo Institute said in their joint autumn forecast.
"Although the situation is expected to ease somewhat over the medium term, gas prices are likely to remain well above pre-crisis levels," the institutes said, warning that "this will mean a permanent loss of prosperity for Germany."
However, Minister of Finance Christian Lindner expressed confidence that the government's stabilization measures would help protect Germany's prosperity. "We are economically strong and we will mobilize this economic strength if necessary."
Editor: Leon
