Marcel Fratzscher, the president of the German Institute for Economic Research (DIW), has sharply criticized the Federal Government’s decision to introduce a new fuel discount. According to Fratzscher, the renewed discount is “costly, socially unjust, and economically counterproductive,” adding that it consumes money the government lacks and ultimately constitutes a “redistribution from the poor to the rich.”
Furthermore, the DIW chief estimates that the government’s hope of gaining popular recognition through the discount is unlikely to succeed, arguing that the financial relief quickly becomes invisible amid large fluctuations in oil prices. Fratzscher expressed similar skepticism regarding the proposed fuel price cap, stating that “the expectations for the fuel price cap are unrealistic.” He believes it will not lead to systematically lower fuel prices, but merely reduce some of the highest peaks.
As an alternative, Fratzscher advocates for direct payments to citizens. He argues that a transfer payment, similar to the 300-euro energy price lump sum provided to adults in 2022, is the “only wise and effective way.” However, he noted that the Federal Government appears to lack the necessary funds, as it has failed to reach an agreement on increasing taxes or reducing subsidies to cover the costs.
Finally, the economist accused the government of attempting to suggest it can solve a problem it genuinely cannot. Fratzscher told the “Handelsblatt” that a loss of prosperity caused by a war in the Middle East “cannot be subsidized away by a state.” He warned that there is a high risk that the government will once again disappoint public expectations.
