The German government proposes to implement a €300 one-time inflation incentive for all employees earning less than €40,000 per year. The payment is meant to assist offset growing living costs, which have been worsened by the conflict in Ukraine.
On Wednesday, the cabinet endorsed the idea, which is anticipated to be approved by parliament in the following weeks. In July, the incentive will be automatically deposited into employees' bank accounts.
Chancellor Olaf Scholz described the incentive as a "targeted measure" to assist individuals suffering with growing living costs. "We know that many people are feeling the pinch right now," he explained. "This bonus will give them some breathing space."
The incentive is part of a larger package of measures designed to assist individuals deal with growing living costs. In addition, the government has promised a reduction in gasoline tax and a one-time payment of €100 to retirees and low-income households.
Trade unions and consumer organizations have applauded the reforms. However, some analysts have cautioned that they may further drive inflation.
The Ukraine conflict has led energy costs to skyrocket, causing other prices to follow suit. In Germany, inflation is presently at 8.1%, the highest level in 40 years.
The administration hopes that the measures announced on Wednesday would relieve pressure on households and companies. However, it remains to be seen if they will be sufficient to avoid future worsening in living costs.