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Germany: Our Energy Bailout Isn’t Selfish

If the German economy sinks, the whole EU economy will sink with it, so the 200-billion-euro aid package the German government approved recently is in fact aid for the whole of the European Union.

This is what Economy Minister Robert Habeck told the Financial Times in an interview, responding to accusations from several EU members that Berlin was undermining the competitiveness of poorer countries by providing generous aid to its businesses and households.

“If Germany were to experience a really deep recession, it would drag the whole of Europe down with it,” Habeck said. “We’re not being selfish — we’re trying to stabilise an economy at the heart of Europe.”

The aid plan focuses on what is effectively a temporary price ceiling for gas, to enter into effect in several phases aiming to alleviate the burden of record-high energy prices.

The money, which is equal to roughly the same sum in U.S. dollars, will come from new loans. The move, however, drew fire from both national governments and a couple of Commissioners, too.

“The massive €200 billion aid plan decided by Germany (worth 5% of its GDP) responds to a need we recognise and have highlighted - to support the economy. But it also raises questions. How can EU countries that do not have the same fiscal space also support businesses and households?” Economy Commissioner Paolo Gentiloni and Internal Market Commissioner Thierry Breton wrote in an op-ed for the Irish Times.

To this, Habeck responded that Germany is not the only EU country taking measures to shield its citizens and businesses from the worst of the crisis by introducing price caps, pointing to France, Italy, and Spain as examples.

At the same time, Berlin remains opposed to the idea of capping the price of gas imports into the EU. This week, Germany and the Netherlands sent out a document ahead of the next round of discussions that suggested a number of measures to tackle the crunch but capping gas prices was not among them, Euronews reported.

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By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on October 14 2022 said:
    Germany’s economy, the biggest in the EU and its dynamo is in trouble with an impending harsh recession because of staggering energy prices. When it is hit by recession, the entire EU will suffer as well, hence the decision of the German government to cap the price of gas for its customers and businesses.

    The criticism levelled against the German decision is that while Germany can afford such a financial package, other smaller EU countries that do not have the same fiscal space can’t.

    The simple answer to that is that if Germany sinks, the whole EU will virtually sink with it but if Germany survives, it can keep at least the majority of the EU countries afloat.

    Germany is reported to be objecting to an EU proposal to cap the price of imported gas saying that any capping will send the gas price even higher than now and that will certainly plunge Germany and the EU in an even deeper energy crisis and a much harsher recession.

    The only rational solution to Germany’s and the EU’s deep energy crisis is lifting the sanctions on Russia. The alternative is a lengthier crisis lasting beyond 2024 and a harsher recession precipitating a cost of living crisis as well.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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