The German government on April 13 said it would sharply cut fuel taxes amid rising energy prices due to the impact of conflicts in the Middle East.
Prime Minister Friedrich Merz said Berlin will reduce taxes on gasoline and diesel by about 0.17 euros (0.19 USD) for 2 months. The decision was made after discussions between the CDU party and coalition partners.
Mr. Friedrich Merz said that the conflict related to Iran is the root cause of domestic economic difficulties, and warned that negative impacts will last in the near future.
Fuel prices in Germany have increased sharply since the outbreak of US-Israel conflict with Iran, as well as after the collapse of US-Iran negotiations and the US blockade of the Strait of Hormuz, causing global energy supplies to be disrupted.
According to Mr. Friedrich Merz, tax cuts will quickly improve the situation for people and businesses, especially those who travel frequently due to work.
The German government also allows businesses to pay tax-free bonuses of up to 1,000 euros to workers to reduce the impact of inflation, which is showing signs of increasing.
However, Mr. Friedrich Merz emphasized that the state cannot compensate for all market fluctuations, nor can it bear all risks from global instability.
To compensate for the budget for the reduction of fuel tax, Finance Minister Lars Klingbeil said the government plans to accelerate the plan to increase tobacco tax.
As the largest economy in Europe, Germany is heavily affected by rising energy costs, while energy-consuming industries have already faced difficulties due to tariffs from the US and fierce competition from China.
Economic research institutes have lowered Germany's growth forecast to 0.6% for 2026, significantly lower than the previous forecast of 1.3%.
