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Germany’s government has warned local authorities that the money it has been distributing amid the energy crisis since last year will not become a new norm.
“All of this burden sharing is based on decisions taken in exceptional political and economic situations,” deputy finance minister Luise Hoelscher said in the ministry’s regular monthly report, as quoted by Bloomberg.
“It’s clear that it cannot be the yardstick for coping with future challenges,” Hoelscher also said. “The financial situation of the federal government has in fact deteriorated considerably in recent years compared with the financial position of the states.”
The federal government of Germany incurred a budget deficit of more than $130 billion in 2022 (129.3 billion euro) largely as a result of pandemic aid and financial support for companies, households, and local governments amid the energy crunch that squeezed the country last year.
Despite the aid, the largest German state, North Rhine-Westphalia, was forced to declare an emergency situation last November in order to be allowed to take on new debt to survive.
North Rhine-Westphalia, home to 20 of the 50 largest German companies, declared an “extraordinary emergency situation” in order to be able to access more loans which would otherwise be denied to the state because of a rule on how much debt a state can borrow
Germany last year doled out as much as 270 billion euros, or close to $290 billion, to protect consumers from the worst effects of the energy crunch, topping the spenders’ list in Europe, including the UK.
The European Union’s total bill for energy aid to businesses and consumers came close to 700 billion euro, or about $720 billion. Some EU member states were not really happy with Germany’s generosity, accusing it of gaining an unfair advantage for its businesses thanks to its deeper pockets.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com