Friend of Democracy,
Politicians in government regularly face a dilemma regarding social policy. If they help only those in need, the vast majority sees no benefit and punishes the policymakers at the ballot box. If they help everyone, costs skyrocket and the welfare state becomes unstable.
The current debate in Germany over the “pension at 63“1 (Rente mit 63) serves as a prime example of this. The government had actually agreed to abolish it. Too expensive. Too many people are leaving the labor market too early. Not a good idea in times of demographic change. But the resistance is enormous. What would make sense: Allowing people to stop working before the standard retirement age—largely without pension deductions—would be right and important for those who can no longer work. But only a minority would actually benefit from that.
The same applies to the fuel dicount2 (Tankrabatt): instead of providing relief to those hit hardest by high petrol prices, the government is once again distributing aid indiscriminately. The result is twofold: first, the per-capita relief is negligible (an average of €10.70 per household per month, at a cost to the state of €440 million per month); and second, only a fraction of the aid reaches those who actually need it (only €8.40 of every €100 in fuel rebates goes to households classified as “energy poor”—meaning they must spend an above-average share of their income on energy). Furthermore, the fuel rebate drives up demand for petrol by two percent—a counterproductive outcome at a time when fuel supplies are tight. (These figures come from Aaron Praktiknjo, Professor of Energy System Economics.)
Clearly, relief measures that are economically efficient and socially targeted would look different. But as mentioned, government policy regularly faces a dilemma here: if the majority does not benefit, the government is punished for it.
What would you do as a politician?
See you in Democracy,
Johannes Eber
“Rente mit 63” is a German pension policy that lets people with 45 years of contributions to the statutory pension system retire without deductions at age 63, rather than the standard retirement age. To be more precise: The exact qualifying age has been gradually rising for younger cohorts as part of the broader increase to 67, so “63” now really applies only to older birth years, with later ones needing to wait a bit longer.
The “Tankrabatt” (fuel discount) was a temporary German government measure in 2022 that cut energy taxes on gasoline and diesel to offset high fuel prices following Russia’s invasion of Ukraine. It ran from June through August 2022 and was criticised for only partially passing savings on to consumers, since retailers kept some of the tax cut as extra margin. The government has now approved a new fuel tax cut effective October 1, 2026, reducing prices by 17 cents per litre (14 cents from energy tax, 3 cents from the resulting VAT decrease) for gasoline and diesel through the end of December 2026, at a cost of about €2.5 billion split between the federal and state governments.