Criticism of the new discount to be applied to fuel prices in Germany

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The head of the German Institute for Economic Research (DIW), Marcel Fratzscher, criticized the decision of Chancellor Friedrich Merz's government to apply a new discount on fuel prices.

In statements to the German economic newspaper "Handelsblatt", Fratzscher said that implementing "a new discount on fuel is expensive, socially unfair, and leads to economically counterproductive results."

He added that this measure "will drain money that the federal government does not have, and ultimately means redistributing money from the poor to the rich."

Fratzscher also believes that "the federal government's hope of gaining more recognition and popularity through the fuel discount will likely not be achieved, because the effect of this relief will quickly become unnoticeable in light of the large fluctuations in prices."

With the same degree of skepticism, the economist's view of the procedure for setting a ceiling on fuel prices was characterized by saying that "the expectations placed on the fuel price ceiling are unrealistic," pointing out that this ceiling will likely not lead to a systematic reduction in fuel prices, but rather its effect will be limited to reducing some peak prices.

Instead, Fratzscher calls for direct payments to citizens. He said that providing a financial payment, such as a lump sum to offset energy costs of 300 euros per adult in 2022, is the only rational and effective way out.

Fratzscher expressed his belief that it appears that the federal government lacks the necessary funds for this, because it was unable to agree on increasing taxes or reducing government support to provide the necessary funding for these payments.