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Global Economy

Not a bad compromise

Tourism in the Polish city of Słubice, around 100 kilometers from Berlin, is booming. But not because of the historic stadium or cinemas – it's the gas stations that even lure tourists with Berlin license plates to the pump for a short visit: A liter of premium petrol costs around 1.20 euros in the border town, almost 50 cents less than in Germany Average price in January.

A longer journey from Germany is also worthwhile for this, says one customer: "It's 25 to 30 euros for the car that you save there. In that respect it's definitely worth it."

Record inflation puts pressure on government

In January, the inflation rate in Germany was 4.9 percent. In December, at 5.3 percent, it was the highest it had been in almost 30 years. The result: a massive price increase, especially in the energy sector.

The traffic light government now wants to cushion this. The "relief package" presented today is primarily aimed at low-income households and small and medium-sized businesses. "We have put together a comprehensive package," said SPD leader Saskia Esken at the presentation of the package entitled "10 relief steps for our country".

EEG levy is eliminated

The SPD, Greens and FDP agreed on the EEG levy, after all they had already agreed to abolish it in the coalition agreement for 2023. The surcharge is now to be abolished by July 1, 2022 in accordance with the Renewable Energy Sources Act (EEG). According to Finance Minister Christian Lindner, this will lead to savings of 6.6 billion euros.

In the end, will consumers even notice this? By the turn of the year, the EEG surcharge had fallen by 43 percent. Due to the massive general price increases, however, this was of little consequence. The effect of the complete abolition of the EEG surcharge, which accounts for 3.7 cents per kilowatt hour of electricity, could also fizzle out.

In order to support particularly low-income households, the traffic light coalition has agreed on a heating cost subsidy. According to this, recipients of housing benefit should receive a one-off payment of 135 euros from the state – plus 35 euros for each additional household member. Consumer advocates are disappointed, they wanted at least 500 euros as a one-time payment.

Heated debate about commuter allowance

The example shows how great the pressure on the traffic light coalition is: relief, yes, but without putting too much strain on the state budget. This is probably one of the reasons why nothing came of plans such as the introduction of a "climate money" demanded by the Greens.

The participants in the coalition committee are likely to have argued particularly hard about raising the commuter allowance. The resolution promoted by the Liberals stipulates that every kilometer driven from 21 kilometers to work can be counted as 38 cents. That's three cents more than before – but less than in the previously known drafts.

The Greens in particular had had a hard time publicly agreeing to the decision in the first place. Green leader Omid Nouripour recently emphasized that the increase would not make any contribution to climate protection. The parliamentary group also fears that the increase in the commuter allowance will primarily benefit people with higher incomes.

There were also concerns within the SPD to the end. Probably also because the relief will only be felt with the tax return in the coming year.

More tax relief and support for those in need

The Greens may have been appeased by introducing the immediate bonus for children affected by poverty as agreed in the coalition agreement on July 1, 2022. Until the planned introduction of basic child security, each child should be able to receive 20 euros per month.

Further details of the relief package: one-off payment for the needy, extension of the short-time work allowance and the increase in the employee lump sum and the basic free contribution to income tax.

In the end, the relief package is probably a compromise decision. But not bad. The Liberals get their commuter allowance, the Greens the child allowance, the SPD the faster end of the EEG surcharge. But more is possible.

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