BERLIN ( TheStreet) -- Resolution to the ongoing feed-in tariff political battle in Germany has been sorely needed for solar stocks to stabilize, and early on Wednesday morning, both Reuters and Bloomberg reported that German Chancellor Angela Merkel's cabinet has agreed to the proposed cuts in the solar incentives.

Rooftop solar feed-in tariff cuts will drop by 16% starting July 1, while support for farmland-based solar projects will be eliminated, and ground-based solar more generally will see a cut of 15%. Solar built on contaminated land sites will only see tariff reductions of 11%.

Of course, the battle is not over yet. After being approved by Merkel's cabinet, the solar plan must be approved by the lower house of Germany's parliament, the Bundestag, though the press reports noted that Merkel's coalition holds a solid majority in the lower house.

Germany's government included some tough words for its own solar industry in a new report, saying the feed-in tariff cuts were necessary with the average sales price of a solar panel falling 40%, and with the new cuts, the German solar makers must work overtime to fend off competition from Chinese solar companies.

German solar shares saw their biggest gains in recent months on Wednesday, while U.S. traded solar stocks rallied significantly on Wednesday morning.

Canadian Solar ( CSIQ), which reported its earnings on Wednesday morning -- and missed on earning per share -- was up by close to 6% early during Wednesday's trading. Canadian Solar provided bullish guidance for 2010 .

Yingli Green Energy ( YGE) and JA Solar ( JASO) were also leading the way in the solar rally, up close to 6% on Wednesday morning.

LDK Solar ( LDK), which announced the resolution to a more than two-year-old lawsuit late on Tuesday that alleged violation of federal securities laws by LDK, was up near 4%.

-- Reported by Eric Rosenbaum in New York.

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