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POLITICS

Germany plans return to debt-limit rules in 2023

Germany will reinstate its so-called debt brake in 2023 after suspending it for three years to cope with the impact of the coronavirus pandemic, sources in the finance ministry said Wednesday.

German Finance Minister Christian Lindner (FDP) at an event in Berlin on June 15th.
German Finance Minister Christian Lindner (FDP) at an event in Berlin on June 15th. Photo: picture alliance/dpa | Michael Kappeler

The government will borrow 17.2 billion euros ($18.1 million) next year, adhering to the rule enshrined in the constitution that normally limits

Germany’s public deficit to 0.35 percent of overall annual economic output, despite new spending as a result of Russia’s war in Ukraine, the sources said.

The new borrowing set out in a draft budget to be presented to the cabinet on Friday is almost 10 billion euros higher than a previous figure for 2023 announced in April.

However, “despite a considerable increase in costs, the debt brake will be respected,” one of the sources said.

Although Germany is traditionally a frugal nation, the government broke its own debt rules at the start of the coronavirus pandemic and unleashed vast financial aid to steer the economy through the crisis.

READ ALSO: Debt-averse Germany to take on new borrowings to soften pandemic blow

The government has this year unveiled a multi-billion-euro support package to help companies in Europe’s biggest economy weather the fallout from the Ukraine war and sanctions against Russia.

Berlin has also spent billions to diversify its energy supply to reduce its dependence on Russia, as well as investing heavily in plans to tackle climate change and push digital technology.

But despite the additional spending, Finance Minister Christian Lindner has maintained the aim to reinstate the debt brake in 2023.

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ENERGY

Gas bills in Germany will remain high despite price cap, warns economist

Germany is planning to bring in a cap on the price of gas for consumers. But a leading economist has warned that energy prices will still remain high. What can we expect?

Gas bills in Germany will remain high despite price cap, warns economist

The German government last week announced a €200 billion relief package to help support private households and companies with spiralling energy prices. 

As part of the plans, a gas price cap is set to come into force in Germany, limiting the amount that people pay to use gas amid rocketing prices. 

The details on how it will work are still being thrashed out. But chairwoman of the gas price commission, Veronika Grimm, has dampened expectations for how big an effect the cap will have on energy bills. 

“We will permanently end our dependence on Russia,” the economics professor at the University of Erlangen-Nuremberg told the newspapers of the Funke Mediengruppe.

“So the gas price will remain significantly higher than before the Russian invasion of Ukraine due to higher liquid gas procurement prices – despite a gas price cap.” 

Grim suggested that the gas price cap could be in the form of a one-time payment to encourage people to continue using less gas. 

“It will be important to maintain a high savings incentive,” she said. “With a one-time payment, that would clearly be the case.

“You would have a much lower incentive to save if you lowered the price of gas by a certain percentage.”

On Thursday the Federal Network Agency warned that people in Germany are using too much gas.

“Gas consumption rose too sharply last week,” said Klaus Müller, head of the agency. 

He said gas usage among households and small firms was nearly 10 percent higher last week than the average consumption for the years 2018 to 2021.

“The situation could become very serious if we do not significantly reduce our gas consumption,” said Müller.

Meanwhile, economist Grimm slammed the time pressure that the gas price commission panel was under. The commission is to present proposal to policymakers on how a gas price brake could work in the coming days. 

“The decision to convene such a body could have been made a few months ago; after all, the development in gas prices was foreseeable,” Grimm said.

READ ALSO: German households see record hikes in heating costs 

Vocabulary 

One-time payment – (die) Einmalzahlung

Gas price cap/brake – (die) Gaspreisbremse

Significantly higher – deutlich höher 

Foreseeable – absehbar

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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