Germany’s builders and construction trades have been left reeling by the federal government’s decision to reject moves to include tax incentives for repair, maintenance and improvement (RMI) works in residential buildings.

The chairman of the German Construction Federation, Karl-Heinz Schneider, has written to the federal government and leaders of the 16 state governments to call for a “mediation process”.

He said Germany had a responsibility to achieve climate protection targets by improving energy-efficiency in houses and argued that tax incentives for improvement work created significantly greater potential to generate investments.

German has approved a €1.5bn package offering loans next year for energy upgrades to buildings, but the construction confederation argues that this is only one of the tools necessary to stimulate activity.