Germany warns tax revenues to be hit by Iran war

Tax revenues are expected to fall sharply in the coming years, with Germany’s finance minister blaming the “irresponsible war” in Iran for the drop.

Read a summary of this article on FAST.
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST Tap here to return to FAST
FAST

FRANKFURT: Germany will generate less tax revenue in the coming years, in large part due to the "irresponsible" Middle East war launched by US President Donald Trump, the finance minister warned Thursday (May 7).

The energy shock triggered by the US-Israeli conflict against Iran is hitting the German economy and its power-hungry manufacturers especially hard.

Tax income for the federal government and local authorities is projected to be nearly 70 billion euros (US$82 billion) lower between 2026 and 2030 than forecast in October, ministry figures showed. 

For this year alone, revenues have been revised down by 17.8 billion euros.

This estimate "shows just how much the war in Iran is harming our economy", said Finance Minister Lars Klingbeil in a statement. 

"The irresponsible war waged by Trump and the resulting global energy price shock are currently slowing positive economic momentum," added Klingbeil, who is also vice chancellor.

Europe's biggest economy has been mired in stagnation for several years, hit by high energy costs, a manufacturing slump and weak demand for its exports.

The government of Chancellor Friedrich Merz was betting on a rebound this year driven by hefty public spending, but the war has dimmed those hopes. 

Berlin has halved its growth forecast for this year, and now expects economic expansion of just 0.5 per cent.

Despite lower tax revenues, the draft budget for next year envisages a substantial increase in investment, which is set to push up government borrowing.

Sign up for our newsletters

Get our pick of top stories and thought-provoking articles in your inbox

Subscribe here

Get the CNA app

Stay updated with notifications for breaking news and our best stories

Download here

Get WhatsApp alerts

Join our channel for the top reads for the day on your preferred chat app

Join here