Germany plans to extend a scheme subsidising energy costs for big businesses that are heavily dependent on energy to all small and medium-sized businesses, as part of a package of measures designed to avoid a wave of insolvencies.
Robert Habeck, the economy minister, said he anticipated that the subsidies would be in place for a limited time, until efforts on the national and European level to bring down high electricity and gas prices took effect.
He said the government would be at pains to “change the design of the electricity market so that cheaper costs can be transferred to consumers”. The aim, he said, was to split the price of electricity from the price of gas. Both have risen markedly since Russia invaded Ukraine and supplies of Russian gas to Germany plummeted, stopping altogether a week ago.
From October the government plans to financially compensate companies that lower their gas consumption. In some cases, companies are expected to temporarily stop production.
Lobby groups have said increasing numbers of businesses are facing existential crises. On Thursday, bakers protested against soaring energy bills that many said threatened them with closure.
Two leading economic institutes raised fears of a recession in Europe’s largest economy, lowering their forecasts for 2023 to a shrinkage of between 0.7% and 1.4%, after growth expectations announced in June of between 2% and 3.3%. Only one, RWI Essen, predicted growth, of about 0.8%.
Habeck told the Bundestag there was a need to address the “demand shock” that would affect consumers and businesses, as many people were already reducing their spending to protect themselves against inflation.
“We will embrace measures to ensure that the people in Germany will have enough money to be able to consume,” Habeck said, without giving further detail.
Peter Adrian, the president of the German Chamber of Industry and Trade (DIHK), earlier told German media that many companies were in fear for their survival. “Increasing numbers of businesses have been telling us that they are no longer getting supply contracts for electricity or gas. They are having the tap closed on them, in the truest sense of the word,” he said. “Without energy, however, the economy will grind to a halt.”
The government has pledged to temporarily relax rules on insolvency. A spokesperson for the justice ministry told the financial daily Handelsblatt that the change would happen “speedily”. He said the measure should help companies “which are in good health and long-term able to survive due to the changed parameters”. He said companies would be given the chance to “adapt their business models” to the changing circumstances.
Habeck said he was optimistic that Germany would rise to the challenge, including the need to free itself from the stranglehold of Russia. Until recently, Germany had aimed to become independent from supplies of Russian gas by 2024. However, since Moscow turned off the remaining flow last Wednesday, citing the need for maintenance work, the separation has come about far quicker.
“We have now been independent from Russian gas for a week, and our storage facilities are continuing to fill up,” he said, adding that the costs of gas since the switch-off were high “but they haven’t exploded”. Gas storage at 47 subterranean facilities across the country stood at about 87% on Thursday. The facilities can take about 28% of the amount of gas that Germany uses in an average year.
EU energy ministers are due to meet on Friday to consider a price cap for Russian gas as well as a limit on the revenue of other energy sources, with a potential differentiation between renewable energy and energy from conventional coal and nuclear power plants.
