Germany's governing coalition of the centre-right CDU/CSU and the centre-left SPD has agreed to temporarily reduce the country's fuel tax by approximately 17 euro cents per litre on both diesel and petrol, Chancellor Friedrich Merz announced on Monday following two days of coalition talks over the weekend. The cut, which will last for two months, is expected to provide consumers and businesses with combined relief of around 1.6 billion euros. Merz said he expected the energy industry to pass on the savings directly and in full to consumers at the pump.
The fuel tax reduction is one part of a broader package of measures agreed by the coalition. Employers will also be permitted to pay workers crisis bonuses of up to 1,000 euros free of income tax and social contributions — a targeted measure aimed at easing household pressures. To partially offset the cost of these measures, the government plans to bring forward an increase in tobacco taxes to 2026, earlier than previously scheduled.
The wider package also includes reforms to Germany's statutory health insurance system and a tax reform targeting low and middle incomes, due to take effect on 1 January 2027. Merz described Monday's announcement as "just the beginning" of a broader effort to modernise the state and restore public confidence in the country's institutions.
The backdrop to the agreement is a sharp rise in global oil prices driven by the ongoing conflict between the United States and Iran. Merz noted that ceasefire negotiations had broken down the previous day, and that the US president had announced a blockade of the Strait of Hormuz — the critical waterway through which a significant portion of the world's oil passes — causing crude prices to climb back above 100 dollars per barrel overnight.
The measures reflect the pressure Berlin is under to shield ordinary Germans from an energy shock with direct geopolitical roots. While the two-month time limit on the fuel tax cut leaves open questions about what happens when it expires, the government is clearly seeking to demonstrate swift, tangible action. Whether energy companies will honour Merz's expectation of a full pass-through to consumers at forecourts remains, as with past such interventions, a key test of the policy's real-world impact.