Germany has unveiled a temporary fuel tax cut and other stimulus measures to cushion the knock-on costs of the unresolved Iran crisis. The measures have also been introduced to tackle growing tensions inside the ruling coalition.
After days of public political squabbles and an emergency weekend summit, German chancellor Friedrich Merz unveiled a two-month cut of 17 cent a litre on petrol and diesel to “improve the situation for motorists and businesses in the country”.
The centre-right leader, aware such interventions are unpopular within the conservative-liberal end of his Christian Democratic Union (CDU), insisted the state “cannot compensate for every market event”.
“The state cannot make up for every risk or disruption due to global politics,” he said. “We are all the state, what we take out of our budget will be lacking somewhere else, which is why this support is limited for two months.”
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German motor-fuel prices are, along with Denmark and the Netherlands, among the highest in Europe. On Monday in Hamburg, a litre of diesel was selling for about €2.24 and super unleaded for €2.17 – with about half of that going on fuel tax, VAT and a CO2 surcharge.
After their weekend meeting, the coalition said employers could pay a €1,000 tax-free bonus, with the revenue shortfall offset by higher tobacco tax.
Merz said his government would present more far-reaching tax reform before the summer break. Also on the way, he confirmed, is an overhaul of a national health insurance system burdened by an ageing population.
But the chancellor acknowledged on Monday that the ongoing global shocks would have a negative effect on the struggling German economy. He highlighted the urgency of reform while simultaneously curtailing fiscal wriggle room.
After months of reform announcements – and, as yet, few reforms – a Sunday newspaper poll suggested 70 per cent of Germans are unhappy with the work of the coalition after 11 months in office.
The opposition Left Party described Monday’s announcement as a “historic failure” as it did not back an emergency excess-profit tax on fuel companies.
“After this press conference, the people in this country know only one thing: this government cannot or will not deliver real solutions,” said Heidi Reichinnek, Left Party floor leader in the Bundestag.
Green Party floor leader Michael Kellner said it was “regressive and irresponsible to increase reliance on combustion engines in a massive oil crisis”.
As Merz’s first anniversary in office looms, a second poll has crowned the chancellor the most unpopular leader among 24 democratically-elected heads of state and government.
Just 19 per cent of Germans in the survey are satisfied with his work while 76 per cent are dissatisfied, according to US-based opinion research institute Morning Consult.
French president Emmanuel Macron ranked second-lowest, with 18 per cent approval and 75 per cent disapproval.
