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Germany Faces $1.2 Billion Power-Subsidy Bill as EU Eases Rules

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Germany is bracing for an additional 1 billion euros ($1.2 billion) in budget pressure after the European Commission granted a surprise expansion of relief measures aimed at curbing industrial electricity costs, Handelsblatt reported on Tuesday, citing Economy Minister Katherina Reiche.

Reiche said the Commission has agreed that, in 2026, a planned state-subsidized industrial electricity price can be combined with existing electricity price compensation, allowing both support mechanisms to operate in parallel.

The industrial power price scheme is a new subsidy tool, while the compensation framework has long helped energy-intensive companies offset costs linked to carbon pricing.

Reiche said Brussels accepted Germany's argument that the measure was necessary due to "exceptionally high" energy prices, which have surged since the outbreak of the Middle East conflict, further pressuring the country's manufacturing base.

The European Commission did not immediately respond to' request for a comment on this story.

The added fiscal burden comes as German Finance Minister Lars Klingbeil prepares the 2027 draft budget, which is expected to be approved by the cabinet in early July but still faces funding gaps.

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