The “Package” of German tax aid on gas: or how to save your own companies by sending those of others to the bottom and cheating on debt

As you know, Germany has decided to cancel the gas tax envisaged to save energy companies (34 billion) and has instead launched a package, or rather a package, of aid to families and companies for 200 billion that includes a "ceiling" on the price of the internal gas.

German finance minister Lindner justified the move by saying “Who can, can, and who can't get by”. They have the fiscal space and they exploit it. But they do it “alla Tedesco”, that is, cheating on the debt and putting the other players in crisis.

Germany has pledged to reintroduce the 2023 debt ceiling as part of government pacts. So how to finance this package now? Simple: by issuing debt, in advance, in 2022 and then taking advantage of the fact that the ceiling is now suspended. The usual trick that will allow Berlin to present itself again as the champion of austerity, while making 200 billion more in debt.

As for the effects of a cap on the price of gas when other countries cannot, or do not want to, apply it, Bruegel , a super-European think tank, explains the effects:

In conclusion, the package certainly sends the wrong signal: Germany is using its fiscal power in a way that could harm other European countries. But this is not an immediate expenditure of 200 billion euros to protect German households and businesses from rising energy prices. Rather, a bazooka was created in response to a German oddity: the decision to effectively suspend new net loans next year. Depending on how the gas brake is designed, gas consumption in Germany may not increase, but may even decrease.

The main risk is that the package of measures disrupts the level playing field at European level. In the absence of a common fiscal response, governments with more fiscal space are inevitably able to manage crises better. If this is done in a way that has a positive impact on other EU countries, it may be acceptable. But if the brake on German gas prices gives German companies a better chance of surviving the crisis than, for example, Italian companies, economic divergences in the EU could be deepened and European unity over Russia undermined.

If German companies, especially in the energy-intensive sectors, will enjoy a lower price, in favor, compared to the Italian or Austrian or Belgian ones, then we will have that the conditions of the single market will be broken, and a country will grant, objectively, a substantial aid of been to companies in your country. A violation of European rules and logic, but given that Germany will do it, no one will complain .

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The article The "Package" of German tax aid on gas: or how to save your own companies by sending those of others to the bottom and cheating on debt comes from .

This is a machine translation of a post published on Scenari Economici at the URL on Mon, 03 Oct 2022 07:00:43 +0000.