FRANKFURT?The European Union and Germany resolved a standoff on Thursday that had put the bloc and its biggest member state on a collision course in Europe's top court and was adding extra strain to the embattled alliance at the center of Chancellor Angela Merkel's government.

At the heart of the fight was a road-toll plan that had set off antidiscrimination alarm bells at the European Commission earlier this fall. According to earlier plans, German drivers would have been able to claw back the cost of the tolls on their taxes while other European drivers would not

The toll was also a prestige project of the CSU, the Bavarian arm of Ms. Merkel's conservative party which has fallen out with the chancellor over her open-door refugee policies and faced a political embarrassment if the plans failed. The CSU continues, meanwhile, to lobby Ms. Merkel to agree to a cap on the number of migrants who can enter the country, but she hasn't budged.

On Thursday, Germany's Transportation Minister Alexander Dobrindt and the EU Transportation Commissioner Violeta Bulc announced they had struck a deal, a small victory for the CSU going into an election year in Germany.

In the newly agreed toll plan, the price of the short-term passes used mostly by non-German drivers will be lowered, Ms. Bulc said. There also won't be a one-to-one tax relief to refund German drivers but instead a tax credit worth a total of about 100 million euros (about $106.5 million) for drivers with top-rated environmentally friendly cars.

Mr. Dobridnt said the toll would bring "additional net income of ?2 billion per legislative period that can be directly invested in infrastructure."

Germany's auto industry questioned how much income the reduced toll would actually generate but greeted the part of the agreement that might boost car sales.

The new tax incentive for drivers with clean cars could "further spark an ecologically beneficial renewal of Germany's automobile fleet," said Eckehart Rotter, a spokesman for the German Association of the Automobile Industry.

Laurence Norman in Brussels contributed to this article.

Write to Zeke Turner at Zeke.Turner@wsj.com

(END) Dow Jones Newswires

December 01, 2016 19:55 ET (00:55 GMT)

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