Germany prepares a USD 1.9 billion fuel relief package to address the energy crisis.
BERLIN – Germany’s coalition government has agreed on a fuel price relief package for consumers and businesses worth EUR 1.6 billion (around USD 1.9 billion), ending a dispute over how to respond to the surge in oil prices triggered by the Iran war.
As reported by Reuters, energy taxes on diesel and petrol will be reduced by around EUR 0.17 per litre for two months, according to a joint statement from the conservative CDU and their centre-left coalition partners in the SPD on Monday.
The Iran war has been described as causing the largest disruption to global energy supply in history, while the United States’ plan to blockade Iranian ports and coastal areas has further pushed up crude oil prices.
“This war is the main cause of the problems we are facing in our country,” Chancellor Friedrich Merz said at a press conference.
He added that the coalition government would take all necessary measures to address the impact of the conflict, which is currently being temporarily contained under a fragile ceasefire.
The coalition also agreed to grant a relief bonus of EUR 1,000 per employee for companies, exempt from payroll tax and social security contributions.
During weekend negotiations, the parties appeared to ease internal tensions that had surfaced on Friday, when Economy Minister Katherina Reiche, an ally of Merz’s party, criticised a proposal from Finance Minister Lars Klingbeil of the SPD focusing on a windfall tax on oil company profits.
However, a source close to Merz told Reuters that Reiche’s remarks were seen as undermining the chancellor’s efforts to resolve coalition disputes behind closed doors.
The government is under pressure to act as Europe’s largest economy is already facing weak growth and global tariff volatility.
On Monday, Merz also said Germany rejects the European Union’s plan to tighten CO₂ taxes on hybrid vehicles starting in 2027, and will push for a more “technology-neutral” approach in Brussels, including recognition of vehicles powered by renewable fuels.
The government is also preparing broader income tax reforms for low- and middle-income groups, set to take effect from January 2027. (DK/ZH)
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