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Germany Delays Solar Subsidy Cut in Blow to Angela Merkel

Germany’s upper house voted to renegotiate a bill backed by Chancellor Angela Merkel that would cut subsidies for solar power after state leaders from her own party said the plan would threaten jobs.

A majority of the 16 states represented in the upper house, or Bundesrat, today voted to send the legislation to a parliamentary arbitration committee that can make changes. The bill was backed by lawmakers in the lower house in March and has been in effect on a provisional basis since April 1.

“I don’t see major changes to tariff cut levels, but I expect more time to be given to developers to complete projects,” Katharina Cholewa, an analyst at WestLB AG, said by phone before the vote. “While this will give the industry room to breathe, its real problem isn’t subsidy cuts, but the pricing pressure because of fierce competition from Asia.”

Governors are concerned that Merkel’s plan to reduce solar incentives after an installation boom will put additional pressure on domestic manufacturers such as Solarworld AG as Chinese rivals led by Suntech Power Holdings Co. grab market share. Four German solar companies including Q-Cells SE, once the world’s biggest cell maker, have filed for creditor protection since December.

“The legislation in its current form would threaten Germany’s solar industry,” Winfried Kretschmann, the state governor in Baden-Wuerttemberg, said in the Bundesrat today.

Leaders from CDU-led states including Saxony, Thuringia and Saxony-Anhalt said they would vote to change the bill in the session. The legislation was backed by lawmakers in the lower house in March and has been in effect on a provisional basis since April 1.

The arbitration panel may convene before the Bundesrat’s next session on June 15, Martina Fuge, a spokeswoman, said by phone today. If the panel agrees to change the legislation and both houses of parliament approve, the tariff cuts would be altered retroactively, she said.

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