Germany’s coalition government has agreed fuel price relief for consumers and businesses worth \u200c1.6 billion euros ($1.9 billion), ending a dispute over how to respond to an oil price surge triggered by the Iran war.<\/p>\n
The energy tax on diesel and petrol will be cut by about 0.17 euros per litre for two months, the conservative CDU party and its \u200bcentre-left SPD coalition partners said on Monday.<\/p>\n
The Iran war has caused the biggest disruption to global energy supplies \u200bon record, with plans for a U.S. blockade of Iranian ports and coastal areas further driving \u2060up crude prices.<\/p>\n
CUSHIONING THE IMPACT<\/p>\n
“This war is the real cause of the problems we are experiencing in our own \u200bcountry as well,” Chancellor Friedrich Merz said at a press conference.<\/p>\n
He said the coalition was doing everything possible to \u200bcushion the impact of the conflict, which has been put on hold by a fragile ceasefire, and urged oil companies to pass the tax cut on in full. “We expect the oil industry to pass along these relief measures directly and fully to consumers,” Merz \u200bsaid.<\/p>\n
Economists and industry groups were sceptical.<\/p>\n
Marcel Fratzscher at economic research institute DIW Berlin said a large share of the \u200btax break could “end up in oil companies’ bank accounts” and criticised the measures for failing to encourage fuel-saving.<\/p>\n
Germany’s filling station operators \u200cechoed that \u2060concern, calling on the government to impose price controls on oil majors or risk them marking up prices to pocket part of the relief.<\/p>\n
“The government needs to be tough on oil majors,” a spokesperson told the Rheinische Post newspaper.<\/p>\n
The coalition also agreed to let companies pay a 1,000 euro relief bonus per employee, exempt from payroll taxes \u200band social security contributions.<\/p>\n
Weekend talks \u200bappeared to defuse a dispute \u2060that flared on Friday when Economy Minister Katherina Reiche, a Merz ally, criticised proposals from Finance Minister Lars Klingbeil of the SPD to impose a windfall tax on oil companies.<\/p>\n
A \u200bsource close to Merz told Reuters that Reiche’s remarks undermined a push by the \u200bchancellor to resolve \u2060coalition disagreements quietly.<\/p>\n
The government is under pressure to act as Europe’s largest economy struggles with weak growth and disruptions from global trade tensions.<\/p>\n
Merz said on Monday that Germany would oppose a planned 2027 tightening of European Union CO2 levies on \u2060hybrid \u200bvehicles and would argue in Brussels for a more “technology-open” approach, including recognition \u200bof cars running on renewable fuels.<\/p>\n
The coalition is also preparing broader income tax cuts for lower- and middle-income groups from January 2027.<\/p>\n
-Reuters
\n
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