Merz Ally Backs Fuel Tax Cut as German Pump Prices Hit Record

A senior German conservative lawmaker and confidante of Chancellor Friedrich Merz has thrown his weight behind reducing the sales tax on gasoline, calling it an obvious step as fuel costs in Europe's largest economy reach unprecedented levels.

Thorsten Frei, who heads Merz's conservative parliamentary group, said in an interview with broadcasters RTL/ntv that lowering the energy tax again — a measure the government implemented in May and June — could be one option. Another would be cutting the sales tax to 7% from the current 19%. Frei stressed that deliberations must move quickly and should aim to have measures in place by October 1.

The debate comes as international oil prices have surged above $100 a barrel following disruption linked to the U.S.-Israeli war on Iran. The cost of E10, Germany's most widely sold gasoline, has set an all-time high for four consecutive days. The nationwide daily average for a litre of E10 climbed to €2.30 on Tuesday, up from €2.286 the previous day.

Merz, who chaired a cabinet meeting on Wednesday, did not propose specific measures on Tuesday but pledged that proposals would be unveiled "very soon." He has ruled out a windfall profit tax, stating it lacks a legal basis.

The chancellor is under pressure to demonstrate responsiveness to voter concerns ahead of state elections in Berlin and Mecklenburg-Western Pomerania on Sunday. The far-right Alternative for Germany recently defeated Merz's Christian Democrats (CDU) in Saxony-Anhalt. An INSA poll published on Wednesday put the CDU at 7% in Mecklenburg-Western Pomerania, nearly half its result in the previous 2021 election.

Despite the electoral headwinds, Merz has said he will stay on as chancellor to push through his reform package. Frei reaffirmed his support on Wednesday, saying, "We have a great many tasks to tackle here in Germany, and these tasks must be resolved."