Bursting the Bubble

Who should pay to fix German potholes? Weighing the initiative for a toll on ‘foreign’ road users [Updated]

15 July 2014 | by

When Germany’s two largest parties – the CDU and the SPD – approved the coalition treaty just before Christmas last year, Angela Merkel’s sister party (CSU) managed to secure a key concession: the possibility of introducing a controversial motorway toll for foreign passenger cars.

When the proposal was first launched, not many people in Berlin or Brussels took it for more than campaign noise. The majority of the German political establishment rejected its populist undertone and accused the CSU of scapegoating foreigners for German infrastructural woes. There were also concerns regarding the feasibility of introducing the toll in accordance with the EU’s anti-discriminatory rules. While the legislative fate of this proposal is still uncertain, the idea has proven rather resilient.

Although the SPD had opposed this idea and Ms Merkel publicly ruled it out during the campaign, the parties eventually agreed to go ahead with sounding out ways for a toll on foreign cars, based on two conditions: one, any toll would have to be in conformity with European law; two, its consequences should not pose any additional burden on German car owners. It is these two conditions that have kept German transport ministry officials busy over the past months, struggling to come up with a legislative proposal for a toll which would fulfil both.

Dobrindt’s CSU is no stranger to striking populist chords. A hegemon of Bavarian politics for many decades, it has positioned itself as the mouthpiece of ‘the ordinary Bavarian’. A recent case in point: its headline-making charge against the threat of low-skilled migrants from Bulgaria and Romania taking advantage of the German social welfare system, coining the infamous term Sozialtourismus, ‘social tourism’.

Although somewhat defying statistical facts which show that unemployment among EU immigrants is below the country’s average, the call for tougher rules struck a chord in the country’s electorate.

On 7 July, Mr Dobrindt unveiled the long-expected main guidelines of his car toll. It would apply to all vehicles under 3.5 tonnes using German roads (including motorcycles). Under the proposal, starting in 2016, all car drivers will be able to purchase windshield stickers of an average cost of €88 per year depending on cubic capacity, fuel-use and year of construction (payable as €10/10 days, €20/ 2 months or €100/ year).

In keeping with a key campaign promise, it will then only be German drivers who will receive a full reimbursement of the toll through a tax rebate on the motor-vehicle tax. The proposals foresees all toll revenues gained to be re-invested in the maintenance and construction of Germany’s roads. Dobrindt also indicated a starting date for the toll: 1 January 2016.

Footing the bill for Germany’s infrastructural investments

Despite arguments over the appropriate policy response, there is little doubt over the yawning funding gap for German infrastructure. Often hailed as the key driver of the EU economy, German road infrastructure is ailing under high maintenance costs and urgently needed reparation and renewal. The annual gap in needed investments for German infrastructure is estimated to be as high as €7.2 billion (supplementing current investments of €10 billion/year). This figure excludes costs for extending current or construction of new installations.

As these funds are not foreseen in Germany’s €298 billion annual budget (2014), a heated debate has recently emerged on who should pay for the necessary investments.

Alexander Dobrindt and the Bavarian CSU party think it should be foreign road users in Germany. On paper, the toll promises to generate a total of 2.4 billion € in additional revenues and is intended to pay for urgently needed projects. However, the German federal court of auditors disagrees with Mr Dobrindt’s idea due to its potential conflict with EU law and has suggested re-shuffling existing budgetary funds instead of imposing new levies.

While the debate on who is to pay for German infrastructural needs will go on, the CSU and Mr Dobrindt hold both the institutional resources (i.e. the relevant ministry) as well as the right to make the first move on the toll issue given by a paragraph in the coalition treaty.

Provided that Mr Dobrindt can leverage these resources to convince the CSU’s sceptical coalition partner SPD, the key question hovering over his latest legislative initiative is whether his intention to exempt Germans from the toll can be harmonized with the non-discrimination principle of European law.

To address this key question, Dobrindt’s latest initiative crafts a legislative trick aimed at channelling the toll – applicable to all and its reimbursements – only benefiting German drivers through two separate legislative acts. In this way, his ministry argues, the new legislation is formally introducing a toll which is applicable to all drivers.

As Austria and the Netherlands have already announced intention to take any road toll applicable only to foreigners on German roads to court, the toll’s ultimate fate now hinges on whether the two-bill legislative feat will convince both the EU Commission and the EU judiciary.

European legal experts are warning that a direct linkage between the two domestic legislative acts could constitute a type of indirect discrimination which is illegal under European law. In the detailed legislation, the German transport ministry will have to diffuse this notion of a direct link between the two proposals and prove that the tax rebate for German car drivers comes as part of a larger reform constituting a genuine attempt to address public policy priorities, such as greenhouse gas reductions.

Besides the formal requirement of satisfying EU legal hurdles, crafting a convincing reform package for a foreigners-only toll is also key to convincing a German electorate which polls showing solid support for such a measure (53%) but even starker opposition to a general road toll applicable to all road users (76%).

Pending a resolution of crucial details, the Commission has kept a low profile on the toll – initially avoiding directly criticising the proposal before it was officially published. While it is widely assumed that European legislators prefer a European-wide solution, in early 2014, the European Commission’s DG MOVE declared that the idea of a toll on the Autobahn could not prima facie be declared incompatible with EU law; only the actual content of the policy could determine its fate. In its most recent pronouncements on the proposal, the Commission appears to be sticking to its wait-and-see approach: On 7 July Kallas said that the toll actually contained many positive elements while reiterating that its introduction should not discriminate against foreign drivers.

A definite institutional stance may need to wait until a new transport commissioner has taken up the dossier – a process that could take until the beginning of next year.

In the meantime, German conservative (CDU) energy commissioner Oettinger who had publically called Dobrindt’s solution “grotesque” if applied across Europe, described the more recent and detailed proposal as “interesting” albeit complex and agreed to a review by the Commission on its compatibility with European law in detail.

In order to transform his ‘flagship’ issue into reality, Minister Dobrindt thus still faces an uphill battle involving domestic opponents, technical intricacies, legal restraints, and a possible legislative competition from the EU level.

A political observer in Berlin likened Dobrindt’s legislative ambition with a boasting teenager climbing up to the ten-meter springboard in a public swimming pool: Watched by a gazing crowd he then realizes to his horror that the pool below him is almost empty: While the latest initiatives likely poured some much needed water into the pool, the following weeks will show whether it will be enough for a safe landing.

What do you think?