“Wide Rescue Umbrella”: Germany Plans To Support Companies As Energy Crisis Worsens

“Wide Rescue Umbrella”: Germany Plans To Support Companies As Energy Crisis Worsens

Natural gas and electricity prices have become so expensive in Germany that the economic engine of Europe is shutting down and at risk of a ‘Lehman-style’ collapse. To mitigate energy cost burdens, the German government unveiled a new proposal to increase a pandemic-era rescue fund to save small and medium size companies that could face a wave of bankruptcies amid the worsening energy crisis. 

On Thursday, Bloomberg quoted German Economy Minister Robert Habeck as saying new financial aid for businesses to cover energy costs could soon be made possible. 

We will open a wide rescue umbrella,” Habeck told lawmakers in Berlin. “We will open it widely so that small and medium enterprises can come under it,” he said. 

Habeck’s comments come after German Chancellor Olaf Scholz’s coalition agreed on a 65 billion euro program to support millions of struggling households with soaring power bills. 

A participant at a parliamentary committee late Wednesday said Habeck was willing to use an existing pandemic-era aid program to support companies — about 20% of the 5 billion euros has already been spent. 

Habeck said at the closed-door meeting that drawing funds from the Covid program could spark constitutional debt limit issues, according to the participant, who asked not to be named. 

In his speech to lawmakers, Habeck said the energy crisis could persist well beyond this winter, adding financial support for businesses will be temporary as Germany and the EU work to reform energy supply chains away from Russia. 

“We are looking at the electricity market design,” said Habeck. “If this doesn’t work immediately and solidly, then we also consider the option of a windfall levy and give this back to the citizens.”

Besides Germany, UK Prime Minister Liz Truss also laid out a plan to support households and businesses amid energy hyperinflation as Russia’s energy giant shuttered the Nord Stream 1 pipeline to Europe last week. 

European politicians are maneuvering ahead of a pivot meeting Friday, where they will discuss plans to reduce energy costs, consumption, possible price caps on energy products, and even suspension of power derivatives trading — as the bloc races against time to thwart what could be a ‘Minsky’ moment as we reported European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least $1.5 trillion

Tyler Durden
Fri, 09/09/2022 – 05:45

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