Germany planning to tackle record-breaking fuel prices, says Merz

Germany is planning measures to tackle record-breaking fuel prices, Chancellor Friedrich Merz said, amid conflict within his coalition over how to reduce pressure on consumers, reported dpa.

"We will react to price gouging," Merz told an employers' conference organized by the BGA trade association. "I believe that we must act."

The chancellor did not offer any detail on how his government intends to act. "However, you can rest assured that we will be putting forward a proposal on this very soon."

The comments came as the ADAC automobile club confirmed a record nationwide average petrol price of €2.286 ($2.64) per litre on Monday, with diesel approaching the peak set in April shortly after the beginning of the US-Israeli war in Iran. Higher energy prices worldwide have been linked to the war and the blockade of the Strait of Hormuz.

Earlier this year, Merz's government introduced a two-month fuel tax cut to relieve motorists, but the Kiel Institute for the World Economy (IfW) on Tuesday cautioned against reviving the measure.

Ministers should be "very cautious" about interfering with fuel prices, IFW economist Klaus-Jürgen Gern told Deutschlandfunk radio. The government should keep a close eye on which groups are struggling to pay electricity and heating bills, and seek to "soften hardships."

The general fuel tax cut, however, is counterproductive, Gern argued. "It supports people who don't need it. And in the end, there is a shortfall in public funds, where there are actually more important things to finance. There is then a shortfall for investment, and a shortfall for other important social spending."

The debate over how to tackle the rising fuel prices has also exposed cracks within Merz's conservative-led coalition, amid plunging approval ratings for the federal government.

Tim Klüssendorf, the general secretary of the centre-left Social Democrats (SPD), accused Economy Minister Katherina Reiche of inaction on Tuesday.

"We've had enough," Klüssendorf told news portal t-online in a broadside against Reiche, who is from Chancellor Friedrich Merz's Christian Democrats (CDU).

"Millions of people in our country are still dealing with completely excessive fuel prices, and the responsible minister Katherina Reiche is watching by while oil giants make record profits at the expense of the public," Klüssendorf said. "We urgently need measures against extortionate fuel prices."

The SPD is calling for three measures to tackle the persistently high fuel prices: a price cap based on those in place in Belgium and Luxembourg; a tax on excessive profits made by oil companies; and transparency on how prices emerge.

Reiche has rejected the price cap and advocated for direct payments to those affected by the fuel prices.

"This would be one way of providing rapid relief, but it would need to be targeted specifically at those income groups that pay little or no tax," she said on Monday, while leaving open the possibility of a reduction of energy taxes.

Merz pointed out that the Federal Cartel Office has been given the power to monitor abuses, but admitted "that at least from the consumers' point of view, this is not enough."

For many people who rely on their cars on a daily basis, a breaking point has been reached, the chancellor said.