BERLIN (AA) – Germany’s chancellor on Thursday announced plans for a €200 billion ($196 billion) fund to protect consumers and companies from high energy costs.

Speaking at a news conference via video link, Olaf Scholz said: “The German government will do everything in its power to bring prices down.”

He stressed that the German government will scrap a previous plan to impose a gas tax on consumers and introduce a gas price cap to curb rising bills.

The measures will remain in effect until March or April 2024, and a board of experts will work on the details of the price ceiling, Scholz added.

The gas tax is no longer needed, and the new €200 billion worth of funds will help support companies, according to Scholz.

‘Imposing an upper limit on gas price should encourage gas savings’

Economy Minister Robert Habeck also said the energy crisis is on the verge of becoming an economic and social crisis.

“Capturing gas prices should encourage gas savings,” Habeck said.

“We are in an energy war,” Finance Minister Christian Lindner said, pointing to the gas supply cutoff by Russia.

Germany will mobilize its economic power when necessary, and the measures announced today should not fuel inflation in the country, Lindner noted.

Economic stabilization fund

The prime ministers of Germany’s 16 federal states called on the government to impose an energy price cap on Sept. 28 amid skyrocketing electricity and gas prices.

Scholz, Habeck, and Lindner were negotiating this week on the terms of the gas price cap.

The gas price cap will be financed through the Economic Stabilization Fund, which was set up to assist companies during the COVID-19 pandemic, without additional budgeting.

Scholz’s €200 billion fund announcement came after the soaring inflation in Germany, from 7.9% in August to 10% in September, reaching a record of 71 years.

Energy crisis

Germany faces a spiraling energy crisis triggered by Moscow’s decision to stop the gas flow through the Nord Stream 1 gas pipeline.

On Sept. 19, the German government nationalized the energy company Uniper — in which Finland’s public company Fortum has a majority stake — to secure supply during the energy crisis plaguing Europe.

Meanwhile, the German energy market regulator (Bundesnetzagentur-BNetzA) warned that households and companies used too much gas last week with the sudden temperature change, and that this latest natural gas consumption is too high to remain sustainable.