Germany drops stricter energy savings requirements for houses

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Good morning. European U-turns on green pledges are coming so fast now that we can barely keep up. Today, our Berlin bureau chief runs us through Germany’s latest, on new building energy efficiency rules. And our Moscow bureau chief hears a call for peace from one of Russia’s most notorious oligarchs.

Plus, I strongly recommend you sign up here for the FT’s newest newsletter: Chris Giles on Central Banks. Launching on October 17, it will bring you a weekly dose of inflation, interest rates and what the world’s monetary policymakers are thinking.

German (in)efficiency

Germany has decided to shelve stricter energy efficiency rules for new buildings, in the latest example of a volte-face on environmental policy by a government scrambling to kick-start its weakening economy, writes Guy Chazan.

Context: Germany’s ruling coalition had originally agreed to impose energy efficiency rules dictating that new houses should consume just 40 per cent of the energy of a regular new-build. But the plans have angered the construction industry, which is already struggling with high interest rates, expensive materials and excessive bureaucracy.

Economy minister Robert Habeck yesterday announced the new standard would not be introduced in this parliamentary term, which ends in 2025.

He said a recently adopted law encouraging people to switch from oil and gas boilers to heat pumps would ensure climate-friendly heating systems in buildings from 2024.

“Therefore I no longer consider it necessary to rush to introduce the new . . . standard,” he said in a statement. “We can wait with that,” he said, adding it made no sense to implement the law before European rules on buildings were finalised.

To tackle Germany’s lack of housing, chancellor Olaf Scholz’s government had promised to build 400,000 new flats a year. But that plan has been scuppered by a perfect storm facing the construction industry.

Soaring borrowing costs have suppressed demand for new mortgages and reduced house prices, while inflation has raised the cost of building new homes. German construction costs are 38.5 per cent higher than before the pandemic hit in early 2020.

A recent survey by the Ifo Institute in Munich found that builders were cancelling construction projects at the highest rate since German reunification three decades ago.

A number of German developers have filed for insolvency in the past few weeks, while prominent landlords such as Vonovia and Aroundtown have announced big writedowns of their property portfolios.

The government yesterday also adopted measures to support families buying their own homes and introduced new tax incentives for construction projects.

But environmental groups were disappointed with the outcome, especially the decision to ditch the energy efficiency rules. Antje von Broock, head of the organisation BUND, called it a “fiasco”.

Chart du jour: Buying local

After a post-Covid trade boom, global volumes of trade have fallen at the fastest rate in about three years owing to high inflation, rising interest rates and trade restrictions.

The price of war

Russian oligarch Oleg Deripaska has made a cautious call for an end to the war in Ukraine in an interview with Max Seddon, but pointedly avoided directly criticising Russia or president Vladimir Putin.

Context: Deripaska, an aluminium tycoon who married into the family of former president Boris Yeltsin, is sanctioned by the US, UK and EU for his closeness to the Kremlin. While many Russian oligarchs are privately against the war, just a handful have publicly condemned it.

“I still have no value in this war. I don’t understand what was the reason. I can’t see why it shouldn’t be stopped from both sides,” Deripaska told the Financial Times, also admitting “surprise” that Russia had weathered western sanctions during a war he thought would bankrupt the Kremlin.

“I can’t see that anyone will reach its declared goal,” Deripaska said. “Will you give F-16, F-35 [fighter jets]? You know, the only goal which would be reached would be more suffering and more lives would be lost, more wounded [for] maybe 5, 10, 20, 25 kilometres left or right.”

His calls for negotiations are anathema to Ukraine and many of its western backers, which have said talks would essentially formalise Russia’s annexation of large swaths of Ukraine’s south-east.

But as Kyiv’s counteroffensive continues to make slow progress against Russia’s heavily fortified defences, Deripaska said more fighting would mean “another 50,000 dead from both sides [and] maybe 150,000 wounded” by next year.

“Do you really believe that it’s wise to have another 200,000 people . . . who would suffer another 12 months?,” he asked.

What to watch today

1. European Commission president Ursula von der Leyen meets Czech prime minister Petr Fiala in Prague.

2. Russian foreign minister Sergei Lavrov hosts his Tunisian counterpart Nabil Ammar in Moscow.

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