Germany is leading Europe in its financial response to Russia’s invasion of Ukraine, raising the prospect of billions in aid for those hurt by surging gasoline prices and pushing ahead with the purchase of almost three dozen F-35 warplanes.
Finance Minister Christian Lindner on Monday 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 as much as €2 billion ($2.2 billion) a month.
Defense Minister Christine Lambrecht later confirmed that older Tornado fighter-bombers will be replaced with F-35s manufactured by Lockheed Martin Co. Germany will buy 35 of the $100 million-plus warplanes, and 15 Eurofighter jets equipped for electronic warfare, a Defense Ministry official said — part of an unprecedented €100 billion spending spree to modernize 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 policy makers into radical responses to deal with the repercussions sending shock waves through the global economy.
European Union leaders last week discussed financing as much as €2 trillion in new spending on defense and energy that will be required to address the new threat from Russia and reduce dependence on Moscow for imports of fossil fuels.
Lindner said his Free Democratic Party on Monday backed a proposal for compensation on motor-fuel bills and it would now be discussed within the ruling coalition of the FDP, the Greens and Scholz’s Social Democrats.
Lindner’s deputy, Florian Toncar, earlier tweeted that the goal is to get the price for a liter of gasoline back below €2 ($2.20). Another step being considered is additional help with rising heating costs for families receiving state rental support, Lindner said at a news conference in Berlin.
"The state cannot leave citizens and industry to cope with rising energy prices on their own,” Lindner said. The aim is to provide "very swift support” both for private citizens and for businesses, he added.
Gasoline prices have surged across Europe following Russia’s invasion and threats to expand sanctions to energy are raising questions about whether Russian supplies will keep flowing. Britain, Germany and Italy have some of the highest prices, while Poland and Hungary have some of the lowest.
Lindner and the FDP want to compel gas-station operators to cap pump prices and the government would then compensate them directly for the lost revenue, according to an FDP official who asked not to be identified discussing confidential information.
The measure is meant as an interim "crisis instrument” initially for three months, which could cost the government as much as €6 billion, the official said. The plans could still change during negotiations between the three coalition partners.
The F-35s are needed to replace aging Tornados that were Germany’s only planes capable of carrying nuclear bombs. Germany had been weighing a choice between the Lockheed model and Boeing Co.’s F/A-18 Super Hornet for its "nuclear-sharing” role, in which NATO members without arsenals of their own share in the planning and potential use of such weapons.
The military preferred the F-35 for the nuclear role because it is newer and has greater stealth capability. Nuclear share countries such as Belgium, the Netherlands and Italy have all opted for the F-35. But it was also seen as a threat to the viability of the future German-French New Generation Fighter.
But instead of a European aircraft, it appears Boeing has been pushed aside. Initially, the military had planned to order 45 F/A-18s, including 30 capable of carrying nuclear bombs and 15 Growler variants equipped for electronic warfare.
Now that requirement has been upsized by five aircraft and split between Lockheed Martin and the Eurofighter consortium, which is led by the U.K.’s BAE Systems PLC and includes Airbus SE and Italy’s Leonardo SpA.
Germany has also been weighing a follow-on order for 40 Eurofighters. That tranche is still under negotiations, the Defense Ministry official said.
Senior officials indicated earlier Monday that the federal government may need higher net borrowing on top of the €99.7 billion already programmed for this year due to the uncertainty over the economic outlook caused by the war in Ukraine.
Together with the new €100 billion defense fund, which is not included in the regular federal budget, the country’s net borrowing is already on track to reach nearly €200 billion in 2022 — the second-highest since the Second World War behind 2021.
Asked about the FDP fuel proposal, Ricarda Lang, a co-leader of the Greens, said measures to ease the burden on consumers are certainly needed but they also need to go beyond gasoline and cover other areas like natural gas and groceries.
Any steps taken must benefit those who really need assistance, she said at a news conference in Berlin, adding that she expected significant progress on a package by the end of the week.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.