Germany's Merz says public finances cannot offset all price rises from Iran war

BERLIN, March 25 (Reuters) - German Chancellor Friedrich Merz said on Wednesday public finances could not make up for the shock to energy prices caused by the war in Iran, and that the best way to control prices would be to end the fighting.

Answering questions in parliament, he said there were "measures we can consider" to ease the strain but that "we cannot offset every price trend through tax measures or measures funded from the federal budget".

"The best way to bring prices back under control is to end the war in Iran," he said.

Like other countries, Germany has seen fuel prices soar since the start of the war, with critics accusing oil companies of using the crisis for price gouging.

Merz said he was sceptical about calls for a tax on "excess earnings" of oil companies from his coalition partners in the centre-left Social Democrats, saying the term was practically impossible to define legally.

He said Germany was working with European partners to persuade the U.S. and Israel to find a diplomatic solution to the war, which has largely closed the vital Strait of Hormuz to shipping, sending energy prices soaring worldwide.

"However, this requires a willingness on all sides, including Iran's, which is clearly not evident at the moment," he said.

Germany would be willing to join international efforts to stabilise the region once the hostilities end, but this would require a mandate from the United Nations, he added.