Germany braces for prolonged economic pain from Iran war, Chancellor Merz warns

German Chancellor Friedrich Merz on Monday warned that the Iran war will have lasting consequences for the global economy, with Germany preparing to deal with a significant and prolonged burden on its own economy.

“We will feel the consequences of this war for a long time to come, even after it is over,” Merz said at a press conference in Berlin.

“Consequently, we are also preparing for a significant burden on the German economy for an extended period – and thus a considerable burden on private households as well.”

The conservative leader expressed regret over the end of US-Iran talks in Islamabad without an agreement, while noting he had anticipated difficulties from the outset.

“I wasn’t surprised by the decision to break off the talks in Islamabad. From the very beginning, I didn’t get the impression that they were really well prepared,” he told reporters, adding that reaching a diplomatic solution would be a lengthy process.

“We are talking with the US administration, we are talking with the parties to the conflict, and we are talking with Israel,” Merz said. “This will remain a long-term process,” he stressed.

To ease the immediate pressure from rising energy prices triggered by the conflict, Merz announced that his coalition government had agreed on targeted relief measures for businesses and households.

“We are reducing the energy tax on diesel and gasoline by approximately 17 euro cents ($0.20) per liter for two months,” Merz told reporters.

“This will very quickly improve the situation for motorists and businesses in the country – especially for those who use their cars for work,” he said.

The government will also allow companies to grant employees a tax-free “relief bonus” of up to €1,000 ($1,170).