Germany: Limited fiscal cushion for energy shock – Deutsche Bank

Deutsche Bank’s Sebastian Becker assesses Germany’s new fiscal relief package to counter higher energy prices from the conflict in Iran, judging it small relative to 2026 GDP and earlier 2022–23 measures. The temporary energy tax cut and employee bonus are seen as offering negligible support to growth and only marginally reducing inflation, with much of the gross relief offset by windfall and tobacco taxes.

Mini-package offers modest macro support

"The recently unveiled relief package, worth EUR 7-14 bn (around 0.15-0.30% of 2026F GDP), offers only limited fiscal relief and we expect it to have a negligible impact on GDP growth."

"All up, due to persistently high oil prices, we now forecast inflation closer to 2.9% this year (up from the previously projected 2.7%)."

"However, with both measures slated for re-financing through a windfall profit tax and increased tobacco tax, the net fiscal impact is expected to be negligible."

"The dampening effect on the 2026 inflation rate will also be very small, around 0.05pp for the full year."

"Consequently, the German economy would likely need to face another recession–or a further sharp escalation of the energy price shock–to justify such a measure."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)