Relief Packages to Cost the German Government EUR 135 Billion
The German government’s three relief packages will cost around EUR 135 billion for the 2022–2024 period. This corresponds to 3.8 percent of the country’s economic output in 2021, according to ifo Institute calculations. “That sum does not include the gas and electricity price brake, which is estimated at a further EUR 90 billion and which has not yet been passed by the Bundestag,” says ifo tax specialist Max Lay. He estimates the relief from the three packages at EUR 33.3 billion for this year, EUR 49.0 billion for next year, and as much as EUR 52.2 billion in 2024.
“The losses of real income due to higher energy prices will be borne by society as a whole,” cautions coauthor Andreas Peichl. “The government cannot prevent these losses; it can only redistribute them. If the government tries to shield the entire population, it must either provide fewer public goods or levy higher taxes in the future. Government support should follow two rules: maintain energy-saving incentives across the board, and give assistance only to the hardest-hit households.”
“The biggest chunk this year is the net EUR 10.4 billion for the one-off energy payments to employees,” Lay adds. This is followed by EUR 6 billion for the pensioners’ energy allowance, then EUR 3.1 billion for the temporary reduction in the energy tax, EUR 2.7 billion for the increase in the basic tax allowance, EUR 2.5 billion for the 9-euro ticket, and EUR 2.0 billion for the reduction in VAT on gas. In the coming year, this reduction in gas VAT will cost up to EUR 6.5 billion.
Publication (in German)
Entlastungspakete, Tankrabatt, Übergewinnabschöpfung: Wie weit kann der Staat uns in Krisen schützen?
ifo Institut, München, 2022
ifo Schnelldienst, 2022, 75, Nr. 11, 03-31
