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Germany’s ruling coalition agreed to subsidize energy prices for heavy industry over the next three years as it tries to revive a deeply slowing economy. EuropeDisplay of.
chancellor Friedrich Merz He said he and other coalition leaders agreed Thursday evening to impose an electricity price of about 5 euro cents (6 U.S. cents) per kilowatt hour from Jan. 1 to 2028 to “support companies that use a lot of electricity and face international competition.”
discussed the plan with European UnionThe executive commission is almost complete, Merz said, and “we believe we will get approval for this.”
The German economy, Europe’s largest, has shrunk for the past two years and has not seen any significant growth for a long time. Coalition government of conservatives with centre-left social democrat Revival has been his priority since he took charge in early May.
Still, the results have not yet come in, with GDP stagnating in the third quarter. This week, the government’s panel of independent economic advisers forecast growth of 0.2% this year followed by an unimpressive 0.9% growth next year.
The country’s economy, which is heavy on manufacturing and exports, has been held back by a number of factors, including high energy prices, competition. Sugar Manufacturers of autos and industrial machinery, shortages of skilled workers and excessive bureaucracy.
The government has launched a program to encourage investment and set up a 500 billion euro ($581.4 billion) fund to pump money into Germany’s crumbling infrastructure over the next 12 years. The government promises to eliminate red tape and accelerate the lagging digitization of the country.
ING economist Carsten Brzeski, who puts current energy prices at around 15 euro cents (17 US cents) per kilowatt hour, said on Friday that the planned subsidies “send a strong signal and can provide the industry not only with short-term relief but also clarity and stability for years to come.”
Holger Loesch, deputy managing director of the Federation of German Industries, said the subsidized price would “especially help energy-intensive industrial companies remain internationally competitive,” adding that he hoped the EU would give Germany leeway to reduce costs for a larger number of companies.
Finance Minister Lars Klingbiel put the expected cost of the measure at between 3 and 5 billion euros ($3.4 billion and $5.8 billion).
The alliance leaders also agreed to cut taxes on airline tickets starting from July, which the air transport industry had been demanding for a long time. The measures will require parliamentary approval.