Merz govt agrees $1.9bn fuel support amid energy crisis pressures

MUNICH: Germany’s coalition government has agreed a $1.9 billion fuel relief package to ease pressure on consumers and businesses hit by soaring energy prices driven by the ongoing Iran war.

Under the plan, the energy tax on diesel and petrol will be cut by around $0.20 per litre for two months, a measure backed by Chancellor Friedrich Merz’s CDU and its SPD coalition partners after days of internal disagreement.

The move comes as global oil prices surge following major disruptions to energy supplies linked to the conflict, intensifying inflationary pressures across Europe’s largest economy. The government said the relief is aimed at cushioning households and firms while ensuring the savings are passed on at the pump.

However, economists and industry groups warned that much of the benefit could be absorbed by oil companies unless strict pricing oversight is enforced. The package also includes a $1,171 per employee relief bonus for companies, exempt from payroll taxes and social contributions.

The agreement marks an early test for the Merz-led coalition, which has faced scrutiny over internal divisions as Germany grapples with weak growth and global economic uncertainty.