In view of the emerging huge additional burdens for citizens and companies in terms of energy costs, Chancellor Olaf Scholz (SPD) is planning further billions in relief. “We will do everything necessary,” Scholz said on Friday in the Chancellery. He interrupted his two-week hiking holiday in Nesselwang in the Allgäu for this. The statement is reminiscent of the words of the then head of the European Central Bank, Mario Draghi, who announced in similar words in 2012 that everything would be done, no matter what the cost, to save the euro. Among other things, Scholz announced a major housing benefit reform from 2023. “We want to expand the circle of eligible households,” said the SPD politician at the short-term press conference. More citizens, workers and pensioners should be able to benefit from it. In addition, a flat-rate heating fee should be permanently integrated. There should also be heating allowances for students.
Scholz left the question open as to whether his statement that everything that is necessary would be done means that the debt brake planned again from 2023 should remain suspended. FDP boss and Finance Minister Christian Lindner has declared a renewed suspension non-negotiable.
The chancellor stressed that there was a clear principle by which his government was acting in response to Russia’s curbing of gas supplies. “You’ll never walk alone,” Scholz quoted Liverpool FC’s famous stadium anthem. “That we get through these difficult times together, that we stick together, nobody is left alone with their challenges and problems”.
This applies to all citizens, but also to companies. “Together we are strong enough to do it.”
Scholz, who had spoken of a “bazooka” with similar announcements during the corona crisis, made it clear that he was ready to take very big steps. “And we will do so for as long as it takes.”
Concerns had recently grown in the federal government that the mood could change, also with regard to support for the sanctions against Russia, ruled by Vladimir Putin, and solidarity with Ukraine. Foreign Minister Annalena Baerbock (Greens) had even warned of “popular uprisings” if the gas tap was turned off.
The official reason for the chancellor’s appearance was the entry into the state of the energy supplier Uniper, which had been in preparation for weeks and was finalized on Friday. Uniper was formerly owned by the Eon Group and sells electricity and gas to wholesale customers such as municipal utilities and industrial companies. It is very active in gas trading with Russia and was in financial difficulties because the lack of deliveries had to be compensated for by expensive replacement deliveries procured elsewhere. Uniper then applied for state aid.
Uniper is of “outstanding importance for the economic development of our country, for the energy supply of the citizens, but also for many companies,” said Scholz. Among other things, the framework credit line granted to Uniper at the state development bank KfW is now being increased from two to nine billion euros.
As announced by Uniper, the stabilization package provides for a capital increase of around EUR 267 million at an issue price of EUR 1.70 per share, excluding shareholders’ subscription rights. At the time of the press conference, Uniper’s share price was around 10 euros.
The capital increase will result in the federal government taking a stake of around 30 percent in Uniper. Furthermore, a so-called mandatory conversion instrument of up to 7.7 billion euros should be issued to the federal government, it said.
These papers are interest-bearing papers that must be converted into shares by the end of the term at the latest. They are therefore considered by rating agencies to be similar to equity. The loan granted to Uniper through the state bank KfW is to be increased from 2 billion to 9 billion euros.
The federal government explained to Uniper during the negotiations that from October 1, 2022, a general mechanism for passing on 90 percent of the replacement procurement costs for all importers as a result of Russian gas cuts should be introduced. Uniper only has commercial customers, including municipal utilities. However, you could pass on the higher costs in a next step.
The agreement stipulates that the federal government is ready to provide further support if losses due to replacement purchases that cannot be offset by operating profits from other business areas exceed an amount of EUR 7 billion.
Despite joining the gas importer, Scholz does not want the federal government to intervene in the operational business. “We don’t want to become entrepreneurs as a state,” he says. But care will be taken to ensure that the state money is used properly.
He also promised that the federal government should not be involved permanently. “It doesn’t have to stay that we’re in.”
The stabilization measures are subject, among other things, to the approval of the EU Commission under state aid law. Uniper will convene an extraordinary general meeting to obtain shareholder approval for the stabilization measures.
The Bundestag and Bundesrat recently passed amendments to the Energy Security Act. The federal government can therefore issue a levy via a statutory ordinance. The levy system should work in a similar way to the EEG levy to promote green electricity via the electricity bill, which has since been abolished.
From September or October, gas suppliers will be able to pass on 90 percent of the difference in costs between cheap Russian gas and expensive replacement deliveries to consumers via a levy. The enormously increased costs can cause additional costs of over 3000 euros per year for larger households. So far, the relief plans have been aimed primarily at low earners, but this would also hit the middle class significantly, especially if there are hardly any reserves.
Scholz admitted that the surcharge would also be felt by households. For families, Scholz put the additional costs at 200 to 300 euros per year, but experts expect the additional costs to be much higher.
When asked whether the debt brake in the federal budget had to be released because of the expenditure for Uniper and the relief for citizens, he replied: “We have the financial leeway we need for this.”
With the surcharge, politicians would also send a price signal to consumers that energy savings are worthwhile. Because of the sharp rise in procurement costs on the markets, price increases are coming to consumers anyway.
Federal Economics Minister Robert Habeck (Greens) announced a new package of measures to save energy on Thursday. In view of uncertain Russian deliveries, the provision for the winter should be strengthened. The package also deals with saving energy in public buildings, companies, offices and a mandatory “heating check” in apartments.
Uniper plays a central role in Germany’s energy supply and supplies more than a hundred municipal utilities and industrial companies. Scholz and Habeck had promised Uniper state support.
