The Federal Ministry for Economic Affairs (BMWE) is analyzing various potential consequences stemming from the Iran crisis over the Easter period. A paper, titled “Alternative Scenarios of Possible Overall Economic Impacts on the Euro Area and Germany” which was obtained by the dpa news agency, weighs potential measures alongside their pros and cons arguments. The document was most recently revised within the immediate circle of Minister Katherina Reiche (CDU) on Easter Saturday.
Regarding a potential reduction of electricity taxes for all consumers to the European minimum rate-a measure publicly considered by Reiche herself-the BMWE perceives an “untargeted relief effect” and a fiscal burden estimated at approximately 5.5 billion euros annually, a figure that is “projected to rise”. Conversely, the measure is deemed “supportive from an industrial policy perspective” due to the structural improvements in the economic viability of future technologies.
Concerning a temporary increase in the commuter subsidy, another proposal from the minister, Reiche’s civil servants identify a “delayed effect and visibility” and a “fiscal burden” as negatives. However, the advantages cited include a “targeted relief effect for professional commuters, but not based on mode of mobility or income” and the assurance that “price signals remain intact”.
For the Ministry, maintaining “price signals”-the concept that prices convey information and have a guiding effect-is of particular importance. This argument appears repeatedly throughout the list.
Similarly, the Ministry views a possible reduction of the value-added tax on fuels to 7 percent negatively. They argue that this measure would have an “untargeted relief effect” undermine the aforementioned price signals, and also impose a “high fiscal burden”.
On the other hand, the so-called “excess profit tax” proposed by various figures including Federal Finance Minister Lars Klingbeil (SPD), can present some positive aspects for Reiche’s Ministry. Although its “legally sound implementation is difficult” and it offers “no direct relief effect apart from the redistribution of revenues” potentially sending a “negative signal from the state to all types of investors and private economic interests” the touted advantages include that “price signals remain intact” and a “fiscal relief, provided excess profits occur”.
Generally rejected by the leadership of the Ministry are “price ceilings” both at the pump and within the European Emissions Trading System. Such ceilings would cause an “untargeted relief effect” “massively undermine cost-saving incentives” and entail a “high fiscal burden if the price ceiling is set so low that oil companies incur losses”.