Germany's cabinet today agreed a package of measures to give Europe's biggest economy a €50 billion ($64.22 billion) boost and help it weather the effect of the global financial crisis.
The plan includes tax breaks and spending on infrastructure aimed at helping German citizens, in addition to a €500 billion bank rescue package to help restore confidence in the financial system introduced last month.
"The package agreed today by the government offers a chance of quickly overcoming the weak economic situation and of protecting jobs," said the paper passed by cabinet, which was drawn up by the finance and economy ministries.
Germany is on the brink of recession and the government is worried that the global financial turmoil will cause a rise in unemployment before next September's federal election.
In a joint paper seen by Reuters, the Economy and Finance Ministries said the stimulus package would generate some €50 billion in investments and contracts.
Measures include the provision of extra funds for small and medium-sized firms to borrow from state-owned development bank Kreditanstalt fuer Wiederaufbau (KfW), tax breaks on new cars and funding for infrastructure projects and building work.
The government will fund the plan at least partly through new debt which will have an impact on its budget consolidation targets.
Finance Ministry documents showed the package would result in a burden of €10.9 billion on the federal budget between 2009 and 2012. The cost to the public sector budget would total €23 billion in the same time period, it said.
The finance and economy ministries said the new economic conditions meant it was no longer realistic to meet their goal of achieving a federal budget with no new borrowing in 2011.
"This does not mean we are giving up on the goal, indeed the government will do everything to achieve a federal budget with no new borrowing as soon as possible," said the paper.
Reuters