The German government has agreed on further steps to counter high energy prices caused by the Iran war, including plans to bring down costs for motorists, following a dispute over how to tackle the crisis.
Taxes on petrol and diesel fuel are to be reduced by €0.17 ($0.19) per litre over two months, the conservative CDU/CDU bloc and the Social Democrats (SPD) said on Monday, after marathon negotiations over the weekend.
Following the surge in prices triggered by the war, the government banned petrol station from raising prices more than once a day.
The measure has so far failed to bring relief at the pump.
A squabble ensued between Economy Minister Katherina Reiche, a conservative, and the SPD over which further steps to take to cushion soaring costs for consumers.
Reiche publicly attacked finance minister and SPD co-leader Lars Klingbeil over his call for state intervention, which she described as “costly, ineffective and constitutionally questionable.”
Chancellor Friedrich Merz then stepped in last week and reprimanded Reiche over her stark comments. She was not part of the negotiations conducted by senior coalition members over the weekend.
Neither Merz’s conservatives nor the SPD appeared entirely happy with the compromise struck on fuel costs, with Merz stressing that he expects the oil industry to pass on the tax cut “directly and without restriction to consumers.”
Both the conservative bloc and the SPD had previously described a fuel tax cut as not ideal, with Economy Minister Reiche pointing to the lack of effect the measure had had when it was implemented following Russia’s war in Ukraine. The SPD had argued that the step would only serve drivers of cars with high fuel consumption.
However, SPD co-leader Klingbeil Klingbeil said he was “very pleased with the results.”
The coalition also agreed to allow employees to receive a tax-free bonus of up to €1,000 to help offset rising living costs, though it will ultimately be up to employers to decide whether to grant the payment.
In order to fund the measures, a planned increase on tobacco tax is to be brought forward to this year.