German coalition dilutes 2024 subsidy cuts after farmer backlash

BERLIN (Reuters) -Germany on Thursday said it was diluting proposed subsidy cuts for agriculture after a backlash from farmers, as Chancellor Olaf Scholz’s coalition seeks to finalise a 2024 budget draft after a court ruling threw its spending plans into turmoil.

The agreed changes to the 2024 draft budget, which also impact a plastic levy and funds for the national railway, will result in 2.5 billion euros ($2.7 billion) less in savings than initially anticipated, said a government spokesperson.

The gradual phase-out of agricultural diesel was among a number of changes announced by a government spokesperson following agreement by Scholz, Economy Minister Robert Habeck and Finance Minister Christian Lindner.

“We have been talking to each other intensively again in the last few days because we can see the burden on farmers,” Habeck said.

“Counter-financing has been found” for the amended plan, he added.

Rather than ending at once, the farmers’ tax break will be reduced by 40% this year, then by 30% in 2025, with a complete end to the subsidy on agricultural diesel from 2026.

The planned abolition of the tax break prompted hundreds of farmers to protest in central Berlin last month.

Scholz’s three-party coalition agreed in December to find tens of billions of euros in cuts, focusing on “climate-damaging subsidies”, following weeks of tense negotiations.

Nearly a third of the remaining spending gap from Thursday’s proposed changes is to be compensated for by making proceeds from 2023 off-shore wind projects available for the 2024 budget.

The rest is to be covered by the “leeway resulting from updated economic and budgetary data in the federal budget”, the statement said, and by additional cuts at the agriculture ministry.

The government was trying to fill a gap of 17 billion euros in the 2024 budget.

($1 = 0.9137 euros)