Germany Mulls Heating Compensation to Ease Pain of Price Surge

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Germany is considering financial aid to help households pay heating costs over the winter months, the latest sign of government action to tackle Europe's energy squeeze.

“We have to do something,” Finance Minister Christian Lindner said Thursday in a speech at a gathering of his Free Democratic party in Stuttgart. “I promise that, with the means I have available, we will provide such solidarity-based support for the people who are particularly affected.”

European natural-gas prices have resumed their rally this year after more than tripling in 2021. The escalating cost of energy has hit households, sending bills rocketing, and forced multiple industries to curtail output.

Read more: European Gas Rises Again as Russia Continues to Curtail Flows

Central to the crisis has been a lack of sufficient supply from Russia. Gas flowing to Europe via key pipelines from the country has sunk to the lowest for this time of year since at least 2015, just as temperatures are set to drop.

Lindner -- head of the smallest party in Chancellor Olaf Scholz's three-way coalition -- said the aid would be targeted at people for whom heating costs make up a disproportionate share of disposable income.

Germany can afford the support, he said, noting that the country's planned net borrowing will be about 10 billion euros ($11.3 billion) less than budgeted.

Alongside the surge in heating costs, Lindner said Germany is watching inflation closely.

©2022 Bloomberg L.P.