Ukraine war: Germany agrees state aid for companies affected by rising energy prices

The government has agreed on a support package for German businesses affected by the war in Ukraine and sanctions against Russia – such as rising energy prices. “Doing nothing is not an option in this situation,“ finance minister Christian Lindner from the Free Democrats (FDP) said. However, the government could not suspend market forces forever or set wrong incentives with respect to the use of fossil energies. “We don’t want to curb structural economic change but prevent structural disruption,” Lindner said.

Economy and climate minister Robert Habeck (Green Party) said the energy price rises would have “dramatic” consequences for some businesses, especially energy-intensive producers. However, it would not be possible to shield companies from all damaging effects resulting from the war and sanctions imposed on Russia would always mean simultaneous negative effects at home.

Habeck said the support package would include credits worth 7 billion euros disbursed by state-owned development bank KfW to secure the liquidity of the companies in the short term. Should things get worse, the government is also preparing a programme to temporarily cushion the natural gas and electricity price increase for particularly affected companies “in the form of a temporary and narrowly defined cost subsidy.” Energy cost support would be made available to businesses whose energy bill had inflated by more than 100 percent compared to 2021. “We must not allow to let systemically relevant companies fail,” Habeck said.

The support package comes after the EU removed barriers for state aid in the wake of the Ukraine war. Companies had called on the government to provide targeted guarantees, credits and governmental involvement in threatened businesses akin to the support granted in response to the coronavirus pandemic. Sharply rising energy prices have put a strain on businesses across Europe since the second half of 2021 and Russia's invasion of Ukraine has only exacerbated worries that companies could collapse due to price rises. The sudden surge in state support due to the pandemic and now the energy crisis has led to concerns about the German government's financial wiggle room to fund important climate action measures.