Key Points
- Germany will subsidize electricity prices for its heavy industry for the next three years.
- The goal is to boost the country’s struggling economy, which has been stagnant for years.
- The subsidized price will be about 5 euro cents per kilowatt hour, starting January 1.
- The plan aims to help energy-intensive companies remain competitive internationally.
Germany’s ruling coalition has agreed to subsidize energy prices for its heavy industry over the next three years. The move is an attempt to jumpstart the country’s stubbornly slow economy, which has been a drag on Europe’s overall performance.
Chancellor Friedrich Merz announced on Thursday evening that he and other coalition leaders had agreed to set an electricity price of about 5 euro cents (6 U.S. cents) per kilowatt hour. The subsidy will start on January 1 and run through 2028, and is designed to “support companies that use a lot of electricity and face international competition.” Merz said that talks with the European Union’s executive commission are nearly complete, and he expects to get permission for the plan.
The German economy, which is the largest in Europe, has shrunk for the past two years and has not seen significant growth for even longer. Revitalizing the economy has been a top priority for Merz’s coalition government since it took office in early May.
However, the results have been slow to show. The country’s gross domestic product (GDP) was flat in the third quarter, and a government panel of economic advisers recently forecast unimpressive growth of just 0.9% for next year.
Germany’s economy, which relies heavily on manufacturing and exports, has been held back by several factors, including high energy prices, competition from China, a shortage of skilled workers, and excessive bureaucracy. The government has also launched a program to encourage investment and has set up a 500 billion euro fund to improve the country’s aging infrastructure over the next 12 years.
The planned subsidy “sends a strong signal and could provide industry not only short-term relief but also clarity and stability for years to come,” said ING economist Carsten Brzeski. The finance minister estimated the cost of the measure to be between 3 and 5 billion euros.
