German Coalition Seals Deal on €6.5 Billion Corporate Tax Relief

(Bloomberg) -- German Chancellor Olaf Scholz’s ruling coalition resolved its latest dispute, sealing a deal that paves the way for €6.5 billion ($7 billion) in corporate tax relief as well as €2.4 billion in additional child benefits from 2025.

The compromise was reached late Sunday during a meeting Scholz hosted in the chancellery in Berlin, according to people familiar with the agreement, who asked not to be identified discussing confidential information.

The three-party ruling alliance was under pressure to put the spat behind it ahead of a two-day cabinet retreat starting Tuesday that is meant to focus on the government’s efforts to boost Germany’s flagging economy.

Scholz and his senior ministers also want to foster an impression of unity that has often been missing in recent months and has contributed to a plunge in support for the coalition parties in opinion polls.

Voters disillusioned with the traditional governing parties and struggling with rising prices for food and energy have shifted allegiance in record numbers to the far-right Alternative for Germany party, which has surged to second place in the polls behind only the main opposition conservatives.

Scholz had to step in to end the latest conflict after Lisa Paus of the Greens, the families minister, blocked the tax relief package pushed by Finance Minister Christian Lindner, the head of the pro-business Free Democrats, because she wanted more money allocated to child benefits.

Paus and Lindner will appear together to present the details of the agreement, which will be signed off in cabinet on Wednesday, at a news conference at 11 a.m. in Berlin.

Lindner, a self-styled budget hawk, has been at the center of coalition infighting, angering the Greens with policy wins on issues including fossil-fuel boilers, combustion-engine cars, and a temporary extension to the life of Germany’s nuclear plants.

(Updates with details on agreement starting in first paragraph)

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