Energy, here is Scholz’s sovereign bazooka of Germany

Energy, here is Scholz's sovereign bazooka of Germany

What's in the German government's $ 200 billion shield against expensive energy and how companies (like Uniper) have reacted. All the details in the article by Pierluigi Mennitti from Berlin

A loan of up to 200 billion euros to the Economic Stabilization Fund (WSF) with the task of curbing the upward pressure on gas prices. This is the measure announced by Chancellor Olaf Scholz in a press conference with Economy Ministers Robert Habeck and Finance Ministers Christian Lindner yesterday in Berlin. A "defensive shield" as the Chancellor defined it, which at the same time puts in the attic the surcharge on gas that was to come into force on October 1st with the aim of saving supplier companies such as Uniper, which ended up in trouble due to the blocking of supplies Russian.

The emergency is equal to that of the pandemic, but the German center-left government reacts differently from what Angela Merkel did, who chose the European path on the vaccine affair. While today in Brussels the energy ministers of the 27 EU countries are meeting to give birth, perhaps, to a watered-down price cap, who knows probably only on Russian gas, however far from the measure supported for months by Mario Draghi, Scholz chooses the path of national price cap. At least as an anticipated move.

On the European proposal there is in fact a last “aperturist” speech by Finance Minister Lindner, last night in a talk show on the Zdf. “If Europe as a whole says: we will only import with this surcharge, this will have a direct braking effect for us on world markets”. For this to work on the world market, Lindner added, the price must be "significantly higher than the price of liquefied gas in Asia, so that oil tankers traveling to us do not turn to Asia." As a liberal, the minister is of the idea that markets should be allowed to work without obstacles, "or that markets should be entered very hard and coherently". What is not needed are intermediate measures, concluded Lindner. “Either we trust the market, or an exceptional situation arises and we intervene with all the strength of the state”. Whether this position develops more decidedly favorable positions than Berlin on the European price cap will be seen today in Brussels and in the coming days.

Meanwhile, Germany follows the national path and entrusts up to 200 billion euros, an enormous figure equal to 5% of German GDP, to the Fund that managed the most economically dramatic phases of the pandemic crisis. The WSF, created in March 2020 and kept operationally active until last June, thus receives new lymph as the outlook for the economy becomes increasingly gloomy, the recession is upon us and inflation (psychologically devastating spectrum for the Germans that recalls always the gloomy memories of Weimar) travels at 10%, + 2.1% compared to August, as announced yesterday by the Federal Statistical Office (10.9% according to the index harmonized with the other EU countries).

A financial bazooka, to use words that Scholz himself, then as Minister of Finance, pronounced at the time of the economic aid package for companies during Covid, which will serve to lift the pockets of families and businesses from the expensive bills (hence the abolition of the surcharge, which had this purpose), to directly compensate the energy suppliers bled by the increases in gas prices on the markets and to effectively reduce the distance between these high market prices and the costs that end customers find themselves on the bills .

The technical details of the operation have not been illustrated, the three main political exponents of the government (Habeck and Lindner are deputy chancellors) have illustrated only the principles and reasons. Operationally, the 200 billion euro package will have to be approved within four weeks by the two branches of parliament, the Bundestag and the Bundesrat, the chamber of the Länder. In a special session of the budget committee of the Bundestag, the government announced last night as the date of final approval by the Bundesrat the session of October 28: exactly one month from today.

In presenting the outlines of the "shield", the chancellor (connected remotely from the room where the press conference was held because he was infected by Covid) used words of war: "Russia continues the aggression against Ukraine and now uses the energy supplies as a weapon of war ", he began," after the attacks on the Nord Stream gas pipelines, no gas arrives from Moscow anymore. We are prepared for this situation, we receive supplies from other countries, but this will not prevent the increase in gas prices which today become the government's priority ”.

Scholz described the planned state support for energy supply and the price cap as a "double blow", again recalling his own statement on state aid made during the Covid crisis, according to which it was a question of get out of the crisis with a bang. "It could be said that this is a double blow," said Scholz, "it is about reducing energy prices quickly and visible to all."

His deputies along the same lines. Robert Habeck spoke of "an enormous financial strength" that comes to the aid of citizens and businesses. "The military war risks becoming an economic war", continued the Minister of Economy, adding that the commitment of the Stabilization Fund is proposed as a non-bureaucratic, fast and powerful measure for the financial volume involved.

And of "energy war", Lindner also spoke, fearing an attack on the well-being and prosperity of Western countries: "It is a direct response to Putin, we are economically strong and mobilize this force when necessary".

From the business side also comes the position taken by Uniper, the company about to be nationalized at 99% with an outlay by the State which will also partly offset the shares and financing of its Finnish subsidiary Fortum. Uniper relied on the gas surcharge, a Habeck idea that even government allies did not like, and which will now be gone. The Düsseldorf-based company Uniper is now pressing on time and now expects quick help from the government. “In order for the gas supply to continue to be guaranteed, it is necessary to bear the costs for the replacement gas supply. The federal government has ensured that gas importers will now receive direct and personalized support for this purpose, ”said a spokesperson for Uniper.

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Fri, 30 Sep 2022 08:34:13 +0000.