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BERLIN — Just days after German leaders claimed to have resolved the country’s budget crisis, cracks emerged in the three-party compromise as thousands of farmers took to the streets of Berlin on Monday to protest a plan to remove key tax privileges.
A convoy of 1,700 tractors blocked the main road leading to the Brandenburg Gate in central Berlin, where thousands of farmers demonstrated against a government proposal to end their tax breaks on fuel and agricultural vehicles. The government wants to introduce the tax increases, which the farmers say would cost the sector about €1 billion per year, to help plug a €17 billion hole in its 2024 budget.
“Today we have sent a clear signal to the federal government: Withdraw the tax increases for agriculture,” Joachim Rukwied, a farmer from Baden-Württemberg who serves as president of the German Farmers’ Association, told POLITICO at the demonstration. “Enough is enough, it must be withdrawn. This policy must come to an end, otherwise a change of government is necessary.”
The standoff illustrates both the fragility of the coalition’s recent compromise and the simple reality that passing a budget won’t be possible without making enemies.
The spending shortfall appeared last month after Germany’s highest court ruled that the government’s use of “special funds” financed with off-balance-sheet debt (to avoid violating the country’s deficit limits) was unconstitutional. The leaders of the governing three-party alliance between the Social Democrats (SPD), Greens and fiscally conservative Free Democrats (FDP) scrambled to find alternative sources of funding, agreeing last week on a series of spending cuts and other measures, including tax hikes on farmers.
That compromise, reached after an all-night negotiating session, began to wobble over the weekend amid backlash from the farm lobby, a formidable political force traditionally affiliated with the opposition Christian Democrats.
Senior members of the coalition, including Greens Agriculture Minister Cem Özdemir and Finance Minister Christian Lindner, expressed reservations over the plan. In an attempt to calm the nerves of farmers, Özdemir spoke at Monday’s demonstration, where he was met with a chorus of boos.
“I don’t think much of the cuts on this scale and I didn’t think much of them in the past,” Özdemir told the crowd. “On the contrary: I warned the federal government against it. I am fighting in the Cabinet to ensure that it does not come to this extent.”
After he spoke, Özdemir told reporters on the sidelines of the event that he would push for a reevaluation of the measures, which still require parliamentary approval.
“If we want the country to be held together in the middle, then it’s worth looking at this again,” he said.
The farmers’ biggest worry is that the tax increases will force many in the sector, which already faces razor-thin margins, into bankruptcy. That risk is not lost on their allies in the German parliament, even those who belong to the governing coalition.
“There’s a limit to what we can ask of our farmers,” said Johannes Schätzl, an SPD MP from Bavaria, adding that the current plan “clearly exceeds the boundary.”
Yet even if Chancellor Olaf Scholz agrees to reverse the decision, the coalition would still have to find the money it hoped to generate through the farm sector taxes elsewhere. While the German budget totals some €450 billion, only about 10 percent of that can be used at the government’s discretion. The rest is earmarked for entitlements such as pensions and health care.
Those fiscal constraints are exacerbated by Germany’s constitutional “debt brake,” which bars the government from running an annual deficit of more than 0.35 percent of gross domestic product, absent an unforeseen emergency.
Unfortunately for Scholz and his partners, a fractious coalition does not meet that test.
