German Bundestag approves controversial diesel subsidy cuts
February 2, 2024
The measure, which has sparked massive protests from farmers, is part of the government's financial plans for 2024. Lawmakers have now finally approved the national budget after a monthslong delay.
The vote on the spending plans follows months of deliberationImage: Ann-Marie Utz/dpa/picture alliance
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The German lower house of parliament, or Bundestag, approved the controversial rolling back of tax relief for diesel use by the German agricultural industry on Friday as part of the government's spending plans.
Later on Friday, the Bundestag also voted in favor of a 2024 budget after much delay.
The budget of around €477 billion ($519 billion) will include €39 billion in new borrowing.
What's the significance of rolling back the diesel subsidies?
German farmers vow to fight on after week of protest
02:27
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The budget financing law was put forward by the current governing coalition of the center-left Social Democratic Party (SPD), environmentalist Greens and business-focused Free Democratic Party (FDP).
Other measures passed Friday as part of the plan include higher air traffic taxes and new rules on financial support for families.
In order for the law to be enacted, it will need to be approved by the Bundesrat, which represents Germany's 16 federal states. German Farmers' Association chief Joachim Rukwied suggested Thursday that the Bundesrat could put a stop to the law.
Why was the 2024 budget delayed?
The German government's spending plans were first derailed in November, after the German Constitutional Court ruled that the coalition may not reappropriate €60 billion in unused credit made available during the COVID pandemic to a climate fund.
German government rushes to slash budget after court ruling
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This ruling left the coalition in disarray, with member parties forced back to the drawing board regarding the country's financial plans.
The three parties could not agree on cuts to the budget after the court decision, with the FDP having a different approach to debt than its two partners. The SPD and Greens seek to take on more debt to boost the country's infrastructure, build more housing and tackle climate change, whereas the FDP wants to strictly adhere to constitutional debt limits.
'Father of the black zero': Germany's love affair with austerity
Former Finance Minister Wolfgang Schäuble was "the face" of the black zero, which came to be the most visible symbol of Germany's national obsession with a balanced budget.
Image: picture-alliance/dpa/B. Weissbrod
Father of austerity
Former Finance Minister Wolfgang Schäuble was "the face" of the black zero. His 2014 financial plans led to Germany not taking on new debt for the first time since 1969, resulting in a balanced budget. It was achieved by financing spending hikes solely with revenues while reducing public debt.
Image: picture-alliance/dpa/W. Kumm
Have your cake
Germany's appreciation for penny-pinching to ensure it didn't rack up fresh debt elicited many wacky homages. Seen here is a "black zero" cake presented to the state parliament of Lower Saxony by the neoliberal Free Democrats (FDP) in 2015.
Image: picture-alliance/dpa/H. Hollemann
'Debt brake' introduced in 2009
In 2009, Germany's constitution was amended to include a "debt brake," ("Schuldenbremse"), despite economists largely agreeing that it does not reduce economic volatility. German states were not permitted to run any structural deficits, and the federal government could only run a structural deficit of less than 0.35% of GDP.
Image: picture-alliance/dpa/R. Jensen
Debt or guilt?
It is something of a linguistic testament to a cultural truth that the German word for debt, Schuld, is also the word for guilt. Germans are content to live with decaying infrastructure, renting instead of buying and not having modern-style credit cards if it means reducing debt. Here, Baden-Württemberg's then-Finance Minister Nils Schmid celebrated the "black zero" with a statue in 2014.
Image: picture-alliance/dpa/B. Weissbrod
'Black zero' questioned
When Germany was thought to be heading toward recession in 2019, the wisdom of a balanced budget was challenged. Germany's resistance to spending and investing created an economy with little room for innovation, expansion or for startups to flourish. According to the keenly watched ifo Business Climate Index "not a single ray of light was to be seen in any of Germany's key industries" that year.
Image: Imago Images/C. Ohde
EU neighbors suffer
Germany's penchant for a balanced budget not only hindered investment in the country, it also affected its neighbors. As an export-driven economy, Germany profits from exporting goods, but insufficient reinvestment of all that extra capital, paired with a low-wage policy that stymied spending, meant the surplus remained stubbornly high, at the expense of other EU countries.
Image: Imago Images/S. Steinach
Point of pride
Across Germany, being debt-free has been marked with strange celebrations, including members of the Christian Democrats posing with a cardboard cutout of a black zero. The city of Dusseldorf even kept a clock marking how many years it has been debt-free, seen here in March 2016. (This gallery was updated on December 27, 2023, on the occasion of Wolfgang Schauble's death.)
Image: picture-alliance/dpa/M. Hitij
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wd/rt (AFP, dpa)
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