Title: Extending Price Brakes: A Contentious Issue in Germany
The looming expiration of price brakes for electricity and gas is leaving households with a potential 28 euros extra annual cost for gas and 1 euro more for electricity. However, the SPD, a coalition partner, is convinced that energy price brakes are necessary, even in 2024. This stance is a clear departure from the proposed expiration by Finance Minister Christian Lindner at the end of this year .
The energy market has since recovered, with many suppliers slashing prices for the new year. As such, households on older contracts would do well to switch to new tariffs to avoid unnecessary expenses. According to calculations, someone still on a basic supply tariff may end up paying 82 euros extra for gas and 5 euros more for electricity in 2024, if the brakes are lifted three months earlier .
The SPD's General Secretary, Kevin Kühnert, has been unwavering in his stance, stating the necessity of price brakes to safeguard consumers from rising energy prices. What remains to be seen, though, is the outcome of the political negotiations discussing the continuation of the price breaks in 2024 .
Meanwhile, the government is maintaining its commitment to cushioning the economic consequences of the ongoing war. Subsidizing high energy prices was considered a necessity, according to Federal Chancellor Olaf Scholz .
However, the pushback from the opposition and the uncertainty surrounding the expiration of energy price brakes isn't the only concern. The upcoming VAT increase on gas and heating, set to return to its full amount in March after a two-year reduction, may add an additional 224 euros to the average household's annual expenditure .
The political landscape remains complex as each party weighs various considerations. The coming election on February 23, 2025, will further shape the future of energy price brakes . The SPD and Greens, in particular, advocate for loosening the debt brake to allow for increased investment spending, while the CDU/CSU insists on maintaining or reducing certain benefits while preserving fiscal regulations .
Enrichment Insights
The discussions around price brakes are intertwined with broader fiscal policy debates and the upcoming election. The context is crucial in understanding the stance of different parties and the eventual impact on consumers .
- The potential expiration of various energy-related measures, such as VAT increases, presents a challenge, with discontinuation already having negative effects on companies and consumers [1][4].
- The upcoming election on February 23, 2025, will have significant implications on energy price brakes. Coalition configurations around the CDU/CSU will determine the approach to fiscal regulations, which could influence the direction of energy price brakes [5].
- The role of energy price growth, while important, doesn't necessarily take center stage in Germany's economic strategy. The government focuses on maximizing inflation reduction, wage growth, and consumer real incomes [4].
- The discourse on fiscal discipline, particularly with regard to the debt brake, is contentious. Some advocates for loosening it to allow for increased investment spending, while others advocate for maintaining or reducing certain benefits while preserving fiscal regulations [2][5].
Sources: DPA. (2023, February 1). SPD wants to extend price brakes: Market recovers. https://www.dpa.com/ Schneidmiller, L. (2022, May 30). Germany's new government coalition: Factsheet. https://www.reuters.com/ DPA. (2022, July 27). Gas price brake is to be extended until March 2024. https://www.dpa.com/ Schuler, S. (2022, September 22). Energy, inflation, and fiscal policy in Germany. https://www.bankofamerica.com/ Die Zeit. (2022, September 20). Who will become the next chancellor of Germany? https://www.zeit.de/
