Germany’s ruling coalition has agreed an emergency energy package after a weekend of marathon negotiations, cutting the mineral oil tax on diesel and petrol by around 17 cents per litre for two months in response to surging fuel prices.
Federal Chancellor Friedrich Merz (CDU), Vice Chancellor and Finance Minister Lars Klingbeil (SPD), SPD leader Bärbel Bas and CSU chief Markus Söder presented the results at a press conference on Monday morning after talks that ran late into the night at Villa Borsig.
“We all share the concern that we are in a difficult situation,” Merz said, citing both economic and geopolitical pressures.
The coalition had “introduced immediate aid in the face of rising energy prices,” he added, describing the measures as “very concrete relief” that would “very quickly improve the situation for car drivers and businesses in the country, especially for those who travel a lot by car for work”.
Klingbeil also spoke of “real and noticeable relief”.
The tax reduction will be counter-financed through antitrust and tax measures.
Antitrust law is to be tightened to combat price gouging, and companies will be able to pay employees a one-off relief bonus of up to €1,000.
Merz was clear, however, that the state could not offset every market movement.
“The war in Iran is the real cause of the problems we also have in our own country,” he said, at least as far as energy prices were concerned.
“We are doing everything we can to work towards ending this war.”
Crisis at the pumps
The backdrop is a sharp rise in fuel costs driven by the disruption to oil shipping through the Strait of Hormuz, through which around a fifth of global oil transports pass.
Petrol prices have topped €2 a litre for both diesel and petrol in some parts of Germany.
An earlier package — limiting petrol stations to one price adjustment per day and giving the Cartel Office greater powers to scrutinise oil company behaviour — has so far delivered little relief for consumers.
“The petrol price frustration is greater than ever,” Saxony-Anhalt Minister President Sven Schulze (CDU) told Bild.
“We need results this week on how to finally reduce the high petrol prices. It is important that citizens and companies feel the reduction immediately and not in weeks or months.”
Pressure also came from the minister presidents of Thuringia and Mecklenburg-Western Pomerania.
Manuela Schwesig (SPD), minister president of Mecklenburg-Western Pomerania, had called for a special meeting between state leaders and the Chancellor on energy prices.
Coalition tensions
The agreement came after a public row between coalition partners that rattled the government ahead of the weekend talks.
Klingbeil had organised a crisis summit on Friday, bringing together trade union and employer representatives, and used it to call for a petrol price cap and a mobility bonus financed by a windfall tax on energy companies.
Federal Economics Minister Katherina Reiche stayed away from the summit but appeared in front of cameras to sharply criticise the SPD’s proposals as “expensive, ineffective and constitutionally questionable”.
Merz was said to be “disconcerted by the public exchange of blows,” according to the Süddeutsche Zeitung.
The CDU social wing also criticised Reiche’s public remarks. A deputy leader of the CDU labour wing went further, telling SWR radio that a “replacement” of the minister was unavoidable given that she had defied the Chancellor.
What else was agreed
Beyond the fuel tax cut, the weekend talks also covered a tax reform aimed at relieving the burden on low and middle incomes, due to take effect in 2027, as well as healthcare reform and the federal budget.
Merz acknowledged that many more agreements were still needed.
Söder described the tax cut as “quick, powerful, unbureaucratic” and an important signal for the months ahead, noting that it applied to both consumers and businesses.
On the antitrust measures, Bas said the law must become “a sharp sword” and one of the most important instruments “to prevent rip-offs at the petrol pumps.”