(Bloomberg) -- Germany’s upper house of parliament passed a diluted bill to provide €3.2 billion ($3.5 billion) of tax-relief measures for companies, ending months of wrangling between the coalition government, federal states and the main opposition party.

The law aims to ease the burden of taxation and bureaucracy to strengthen the country’s competitiveness as a business location, with Europe’s biggest economy struggling to generate growth.

“It is clear that this can only be a first step toward an economic turnaround,” German Finance Minister Christian Lindner said after Friday’s vote in Berlin. “Further steps must now follow at high speed in order to maintain Germany’s competitiveness.”

The approval of the law by the Bundesrat, where Germany’s 16 states are represented, will offer some relief to the embattled government, though the final volume of the measures is far below the €7 billion it originally targeted to help stimulate business.

A plan for tax credits similar to those offered in the US and which Lindner had championed was dropped from the final bill due to concerns among states about how they would be administered. The finance minister said he would continue to campaign for them.

The legislation got through the lower house, or Bundestag, in November, but was referred to a mediation committee by the Bundesrat. Both houses have now approved an amended version of the legislation, which can enter force.

“It’s good that the law has finally been passed, but much more is needed to trigger economic momentum - and there are reasons to doubt whether the current government has the strength to do so,” Veronika Grimm, a member of German Chancellor Olaf Scholz’s panel of independent economic advisers, told Bloomberg.

Monika Schnitzer, who chairs the panel, said it was a shame the legislation had been “cut back so much” due to opposition in the upper house. In particular, a planned bonus for investment in energy efficiency would have been an “important measure for the competitiveness of our economy,” she said.

German industry lobby DIHK said the government needs to go much further to turn the country’s economic fortunes around.

“This law should be the prelude to a fundamental realignment of economic policy,” lobby chief Peter Adrian said in a statement. “After all, the German economy is set to shrink further, insolvency figures are rising and the downward trend in incoming orders is continuing.”

(Updates with comments from economists, industry lobby starting in seventh paragraph.)

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