German Government Abandons Subsidy Reductions Following Farmer Protest

Thursday, the German government reversed a part of its proposed cuts to financial support for farming following widespread protests from farmers. Contrary to the original plans, Chancellor Olaf Scholz's spokesperson, Steffen Hebestreit, announced that the discount on vehicle tax for farming machinery would be kept. Additionally, tax breaks on fuel used by these vehicles would not be removed entirely but gradually reduced, Hebestreit explained.

This decision was made in response to new financial information and a desire to avoid significant bureaucratic challenges for the affected companies, Hebestreit stated. The initial announcement of ending the financial support in December came after a surprising court ruling disrupted the government's spending plans, triggering immediate and substantial protests from farmers who rallied in central Berlin. The demonstrators used tractors to block a major road in the city and even spread manure on the streets.

While the partial reinstatement of tax breaks was acknowledged, Joachim Rukwied, the head of the German Farmers' Association (DBV), deemed it "insufficient." Rukwied emphasized that their stance remained unchanged, advocating for the abandonment of both proposed cuts.

The backdrop to these developments includes a November decision by Germany's highest court, which found the government in violation of a constitutional debt rule by redirecting 60 billion euros ($66 billion) earmarked for pandemic support to a climate fund. In response, Chancellor Scholz and his coalition partners, the Greens and the pro-business FDP, crafted a new financial plan for 2024 after adopting an emergency budget for 2023. Hebestreit indicated that the government aimed to pass the revised budget through the lower house of the German parliament in January, with a provisional budget in place until then.