In light of high fuel prices due to the Iran conflict, Germany's governing coalition has approved a comprehensive package of relief measures. Federal Chancellor Friedrich Merz (CDU) announced the initiatives on Monday following two days of weekend negotiations among coalition partners.
The mineral oil tax for diesel and petrol will be reduced by 17 cents per liter for a two-month period, Merz stated. According to Labor Minister Bärbel Bas (SPD), consumers and businesses should see a total reduction in fuel prices of around €1.6 billion. Additionally, the coalition partners CDU, CSU, and SPD have decided that employers may pay their employees a tax-free relief premium of 1,000 euros in 2026.
Merz emphasized, however: "At the same time, we cannot offset every single outcome on the market with government funds... The state cannot absorb all uncertainties, not all risks, not all disruptions in global politics."
Germany's already struggling economy will feel the effects of the energy shock from the Middle East war for a prolonged period, Chancellor Friedrich Merz warned. "We will continue to feel the consequences of this war for a long time to come, even after it is over," he told a news conference, as his government announced relief measures.
The coalition has also agreed to implement the tax reform for lower and middle-income groups, which was stipulated in the coalition agreement, effective January 1, 2027, Merz announced. Detailed work on the reform is "now progressing intensively," he said.
Regarding the reform of statutory health insurance, the coalition will adopt a draft law in the cabinet by the end of April. The legislation will be based "on the decisions and recommendations" of an expert commission that was recently submitted, Merz explained. Looking ahead to upcoming long-term reforms, Merz emphasized that the weekend decisions are "just the beginning" and "the start of a whole series of consultations that we will continue."
An expert commission recently submitted 66 proposals aimed at stabilizing Germany's statutory health insurance system. The commission states that the measures could save more than €42 billion by 2030 through benefit adjustments and revenue increases.
The coalition's fuel tax reduction has drawn sharp criticism from economic experts and environmental groups. Monika Schnitzer, chair of the German Council of Economic Experts, called the temporary energy tax suspension "the worst of all options discussed so far," arguing it provides blanket support even to those who can afford higher prices. "Targeted support for those who truly need it would have been the better decision," she told Funke Mediengruppe newspapers.
Environmental organization BUND echoed concerns, with policy director Verena Graichen stating that a flat tax reduction primarily benefits high consumers while doing little for drivers who genuinely need relief. She advocated instead for a mobility allowance and temporary speed limits to reduce fuel consumption.
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