Germany changes budget deal after farmers’ protests, cuts marine fund

To soothe protesting farmers, the German government has announced changes to its hard-won budget compromise, which will see some subsidies for farmers kept, and a fund for marine protection slashed.

After weeks of internal negotiations, in December 2023, the German government reached a deal on how to close a €17 billion gap in its 2024 budget, which came after a far-reaching ruling by the country’s constitutional court.

However, the agreement sparked protests among farmers, as fuel and vehicle tax exemptions were meant to be cut. Currently, farmers receive compensation for paid taxes on diesel for agricultural purposes and are exempted from paying vehicle tax for farming vehicles.

Reacting to the backlash, the three-party coalition has “now agreed that the motor vehicle tax exemption for agricultural and forestry vehicles will remain in place as before,” German Agriculture Minister Cem Özdemir (Greens) said on Thursday (4 January).

“The agricultural diesel subsidy will be reduced over several years,” he added. This means the compensation will be reduced by 40% in 2024 and 30% in 2025 and 2026, respectively. Thus, the subsidy will be fully phased out by 2026 instead of 2024.

“The disproportionate burden on agriculture and forestry as part of the necessary budget consolidation is thus finally off the table,” Özdemir said.

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The German government’s delicately constructed new federal budget risks being toppled by pushback, including from inside the governing coalition, against planned cuts to diesel tax breaks for farmers.

Cuts in marine protection and fisheries support

In turn, additional cuts of €100 million will be made in the annual budget of the Agriculture Ministry. Additionally, €780 million in revenue from auctions for offshore wind energy will be repurposed, going into the general budget instead of being used for two funds for marine protection and fisheries.

So far, €1.34 billion – 10% of the revenue from offshore wind energy auctions – was earmarked for environmentally friendly fishing and marine nature conservation measures in the affected areas. This was part of a compromise to align the expansion of offshore wind energy to 70 Gigawatts (GW) by 2045 with nature conservation.

Over half of this money will now be spent for “broader use”, government spokesperson Steffen Hebestreit said in a statement.

This was a “fundamentally wrong signal,” Stefan Thimm, CEO of Germany’s offshore wind energy association BWO, told Euractiv.

A retroactive repurposing of the offshore wind energy auction revenues was already “wrong in principle,” he said, adding that it was a “perversion” that those means, coming from the renewable energy sector, were used to continue a subsidy for fossil fuels.

“The funds from the tenders for offshore wind energy are urgently needed to compensate for the enormous environmental impact of offshore wind energy and the transformation of fisheries,” Kim Detloff, head of marine protection at environmental organisation NABU, told Euractiv.

“Because nature cannot protest as loudly as the farmers, it is once again in danger of losing out,” Detloff said. “As NABU, we are extremely disappointed and hope for a critical reaction from the German Bundestag,” he added.

While the additional cuts will only amount to savings of €880 million, the changes to the agricultural subsidies and a one-year delay of the planned introduction of a plastics levy will result in a loss of €2.5 billion. The remaining gap will be “offset by margins resulting from updated economic and budgetary data,” Hebestreit said.

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“Only first step”, farmers say

Joachim Rukwied, head of the German farmers’ association, said, “This can only be a first step.”

“Our position remains unchanged: Both proposals for cuts must be taken off the table,” Rukwied said, adding, “This is also about the future viability of our industry and the question of whether domestic food production is still wanted at all.”

Therefore, the farmers’ association said the protests against the cuts would continue.

Later on Thursday, some farmers reportedly blocked a ferry from North Sea island Hallig Hooge, on which Economy Minister Robert Habeck (Greens) wanted to return from his holidays.

In a reaction, Rukwied called the blockade a “no-go”. “Personal attacks, insults, threats, coercion or violence are not acceptable,” he said.

Germany solves budget spat by cutting climate fund and increasing energy taxes

The German government has resolved its internal disagreements on how to deal with a €60 billion hole left in the government’s finances after a ruling by the country’s constitutional court, announcing a mix of expenditure cuts and additional sources of income.

[Edited by Alice Taylor]

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