The German government and the country's chemical industry on Thursday presented a sweeping plan to help the ailing sector as it faces new headwinds from the Middle East war energy shock.

Chemicals is one of the most important sectors in Europe's biggest economy but key industry players complain of high energy costs, onerous EU regulations and fierce foreign competition.

Germany's ruling coalition, chemical industry association VCI and chemical workers' union IGBCE together outlined a raft of measures to boost the sector.

These include subsidising power prices, seeking reforms to EU carbon pricing schemes that the energy-intensive sector complains unfairly burden them, and reducing regulations.

"I would like to emphasise how important the chemical industry is from both a national and a European perspective," said VCI president Markus Steilemann.

Chemical companies generate huge revenues and support hundreds of thousands of jobs, contributing to social cohesion and harmony, he said.

But the sector is facing "the most severe crisis since the post-war period, and this crisis is unfortunately being further exacerbated by the current events we are witnessing in the Middle East", added Steilemann.

The surge in oil and gas prices since the start of the conflict last month, as well as supply chain snarls, are weighing heavily on the sector.

Economy Minister Katherina Reiche said the government would soon finalise the details of a previously announced plan to subsidise power costs for industry, including the chemicals sector.

"The biggest competitive disadvantage right now is energy prices," said Reiche. "That is why we are acting now with targeted relief."

Other measures in the plan include speeding up planning procedures, and pushing ahead with the digitisation and decarbonisation of the industry.

The crisis in the chemicals sector reflects a broader malaise in the German economy, whose growth has trailed behind other major economies.

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