Germany eyes €2bn subsidies to ease petrol pump and heating costs

German chancellor Olaf Scholz: Has taken the initiative on defence spending with masasive order of fighter jets.

Germany is setting the pace in  Europe with its financial response to the fallout from Russia’s invasion of Ukraine, raising the prospect of billions in aid for consumers and businesses hurt by surging fuel prices and pushing ahead with the purchase of F-35 warplanes to bolster its airforce.

Finance Minister Christian Lindner threw his weight behind a proposal to ease the burden from the jump in costs at the fuel pump with a temporary rebate that could cost the government up to €2bn. 

Defence Minister Christine Lambrecht later confirmed that older Tornado fighter-bombers will be replaced with F-35s manufactured by Lockheed Martin. Germany will buy 35 of the warplanes at a cost of over $100m (€91bn) and 15 Eurofighter jets as part of an unprecedented €100bn spending spree to modernise its armed forces.

The two announcements were the latest examples of Chancellor Olaf Scholz’s government taking the initiative after Russia’s war on Ukraine forced policymakers into radical responses to deal with the repercussions sending shockwaves through the global economy.

European Union leaders last week discussed financing up to €2 tn in new spending on defence and energy. 

Mr Lindner said his Free Democratic Party backed a proposal for compensation on petrol bills and it would now be discussed in the ruling coalition of the FDP, the Greens and Mr Scholz’s Social Democrats.

“The state cannot leave citizens and industry to cope with rising energy prices on their own,” Mr Lindner said. The aim is to provide very swift support for private citizens and for businesses, he said. 

• Bloomberg