FILE PHOTO: The moon rises as electricians work atop a power pole near the lignite power plant of Neurath of German energy supplier and utility RWE, near Rommerskirchen north-west of Cologne, Germany, February 5, 2020. REUTERS/Wolfgang Rattay

March 24, 2022

By Zuzanna Szymanska and Joseph Nasr

BERLIN (Reuters) -Germany’s ruling coalition on Thursday unveiled relief measures for households grappling with exploding energy costs after Russia’s invasion of Ukraine, including a three-month petrol and diesel subsidy.

The deal between Chancellor Olaf Scholz’s Social Democrats (SPD) and their ecologist Greens and pro-business Free Democrat (FDP) coalition partners should ease tensions over how to respond to ballooning energy costs squeezing households and companies.

The exact size of the package, which also includes tax discounts for workers and families, was difficult to pin down as some details still needed to be finalised, Finance Minister Christian Lindner told reporters.

However, it should be similar in size to a first package of tax relief measures costing around 13 billion euros ($14.28 billion) agreed last month, he said.

“The coalition believes that we, the people and the economy, must protect ourselves in the short term and for a limited time in the face of these enormous price increases,” Lindner said.

“We have put together a package that combines energy, diversification, energy, efficiency and relief measures for citizens.”

The agreement foresees a one-off energy price allowance of 300 euros ($330) for income tax payers as a supplement to their salaries.

Families will receive a one-time bonus of 100 euros per child, which will be doubled for low-income families, and the tax on fuels will be reduced to the European minimum rate for three months.

As a result, the price of a litre of petrol will be cut by 30 euro cents and diesel by 14 cents over the three months, Lindner said.

Before the agreement, the FDP leader floated the idea of a universal fuel subsidy, drawing accusations of populism from economists and members of the Greens opposed to fuel subsidies and in favour of targeted relief measures for low-income households.

The plan also includes allowances for commuters who use public transport instead of cars.

The costs of the measures will be covered in a supplementary budget for this year to be unveiled next month, which will also include funding for humanitarian assistance to Ukrainian refugees and upgrading the German armed forces.

(Reporting by Zuzanna Szymanska Editing by Joseph Nasr and Nick Macfie)

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