Germany Slashes Fuel Tax in $16.5 Billion Energy Package
Germany to Cut Fuel Tax to Help Ease Burden of Energy Prices
(Bloomberg) -- Germany’s ruling coalition agreed on additional measures worth about 15 billion euros ($16.5 billion) to ease the burden on businesses and households from soaring energy costs, including a temporary reduction in fuel prices.
Chancellor Olaf Scholz’s government will cut the tax on fuel for three months by 30 euro cents ($0.33) for gasoline and 14 cents for diesel, Finance Minister Christian Lindner told reporters in Berlin. Officials from the three-party ruling alliance negotiated through the night to reach a deal after initially disagreeing on what measures to adopt.
Scholz’s Social Democrats, the Greens and Lindner’s pro-business FDP also agreed that taxpayers will receive a one-time payment of 300 euros, as well as a one-off boost to child support of 100 euros. To promote the use of public transport, the government will introduce a monthly ticket costing 9 euros.
The overall package is worth about the same as an initial set of measures agreed last month, Lindner said, without specifying the amount.
Scholz has indicated those could cost about 15 billion euros, including subsidies for low-income households, an increase in an allowance for commuters and a cut in a levy to finance the expansion of renewables, bringing the total cost of both packages to around 30 billion euros.
The ruling parties were initially at odds on what the second package should contain, with Lindner and his FDP party calling for a direct rebate on fuel prices at the pump and the Greens pushing for aid targeted at the most needy.
The coalition also reinforced a pledge to reduce its reliance on Russian energy imports and accelerate the expansion of renewables and announced a new campaign to encourage households and companies to become more energy efficient.
Peter Adrian, the president of Germany’s DIHK industry lobby, said that for many companies the three-month cut in fuel tax is “just a drop in the ocean” and would not make much difference to firms whose existence is threatened.
“In some cases, even before the war in Ukraine, it made more economic sense to shut down machines and systems,” Adrian said in an emailed statement. He reiterated the group’s call for deeper tax cuts and more protection for companies in trouble.
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