Marcel Fratzscher, the head of the German Institute for Economic Research (DIW), has warned about the possibility of renewed escalation and significant future costs for the German economy despite a ceasefire in the Iran conflict. Speaking to the “Rheinische Post” on Thursday, Fratzscher stated that while the ceasefire is a crucial initial step, it does not signify the end of the war. He added, “A renewed escalation is not unlikely” and cautioned that the costs already borne by the global economy are enormous, predicting that the open German economy will bear a high price for the conflict.
Separately, and irrespective of the ceasefire, Fratzscher demanded direct financial aid for citizens due to the high petrol prices. According to him, direct financial transfers, such as an energy cost flat-rate allowance-similar to those implemented in 2022-represent the most effective means of providing “swift, efficient, and socially balanced relief” to the populace. He dismissed the idea of a fuel discount, arguing it would increase costs for everyone else and amount to a redistribution from the poor to the wealthy.
In terms of long-term policy, the DIW chief suggested that politics should encourage people to use fossil fuels more sparingly. Furthermore, he advised the federal government to introduce speed limits, autofree Sundays, and promote a stronger shift toward public transport within cities. As another smart measure, Fratzscher recommended lowering the value-added tax on food.
