The German government has backed down in the dispute over aid for German farmers and is withdrawing some of the cuts planned for 2024.

The abolition of the motor vehicle tax exemption in forestry and agriculture will be waived, the federal government announced on Thursday. In addition, the benefits for agricultural diesel would not be abolished in one fell swoop, but only gradually until 2026. With both measures, the government wanted to save almost one billion euros by 2024. The German Farmers' Association (DBV) described the correction of the previous plans as insufficient. "Both proposed cuts must be taken off the table," demanded Association President Joachim Rukwied. The farmers' association is therefore sticking to the action week planned from January 8th with nationwide protests by farmers.

Chancellor Olaf Scholz (SPD), Vice-Chancellor Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP) had agreed on these and other changes to the 2024 budget, government spokesperson Steffen Hebestreit announced. According to the agreement, the plastic tax will not be introduced until the beginning of 2025, one year later than previously announced. This is not the first correction to the budget agreement announced by Scholz, Habeck and Lindner in mid-December. Just a few days later, they had already scrapped a new kerosene tax for domestic German flights, which would have been a burden on Lufthansa in particular.

Habeck described the agreement as a "good and fair way forward". The Green politician explained: "We have now succeeded in finding a solution that helps farmers."

According to the government, the changes will lead to lower relief of around 2.5 billion euros in the 2024 federal budget. Among other things, this is to be offset by the fact that income from offshore wind farms can also be used for the general federal budget. Federal Agriculture Minister Cem Özdemir (Greens) will contribute an additional 100 million euros in savings from his budget. There is also room for maneuver due to updated economic and budget data in the federal budget.

PARTICIPATION INCOME FOR THE RAILROAD NOT YET SPECIFIED

The government also confirmed that proceeds from federal investments should help to increase Deutsche Bahn's equity. "The specific scope, structure, period and company are still to be determined," the communication states. Equity increases totaling 20 billion euros are planned by 2029 as a contribution to covering the additional investment requirements. In the years 2024 and 2025, 5.5 billion euros each are planned.

The previous schedule of adopting the budget for 2024 at the beginning of February remains unchanged. The Federal Government referred to the corresponding plans of the parliamentary groups for an adjustment meeting of the Budget Committee in mid-January and the final budget week of the Bundestag at the end of January.

(Report by Holger Hansen, edited by Christian Götz. If you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)

- by Holger Hansen