Germany cuts fuel taxes in a €2.5 billion support package

The German federal government and the states have agreed to cut taxes on gasoline and diesel by 17 cents per liter, starting next month. The measure is part of a €2.5 billion support package announced by Chancellor Friedrich Merz for people who depend on their cars every day and are feeling the impact of rising fuel prices more strongly.

The decision comes amid rising oil prices, fueled by escalating conflicts in the Middle East and tensions between Iran-backed Houthi rebels in Yemen and Saudi Arabia. Two weeks ago, oil surpassed $100 per barrel for the first time since July, driving up fuel prices across Europe.

The government led by Merz is also preparing a temporary cap on gasoline and diesel prices, following models applied in Luxembourg and Belgium. The cap would take into account oil prices, transportation and distribution costs, and retailers’ margins.

German Finance Minister Lars Klingbeil also supports introducing a European tax on oil companies’ windfall profits. However, the proposal is opposed by Merz’s conservatives. Economy Minister Katherina Reiche says such a tax would be justified only in the event of abusive price increases.