The German cabinet has approved a stimulus package to help Europe's biggest economy and the world's top exporter avoid the worst effects of a sharp global slowdown.
Germany, which accounts for a third of euro zone activity, is widely expected to enter a serious slowdown and may already be in a technical recession if, as expected, output is found to have fallen for the second straight quarter in the July to September period.
Last Monday, the widely-watched Ifo indicator showed business confidence dropping in October to its lowest point in more than five years, and the government has slashed its 2009 growth forecast to just 0.2%, the slowest rate of growth Germany last suffered a recession in 2003.
Chancellor Angela Merkel has stressed that any measures would be 'targeted', with Berlin highly critical of proposals by French President Nicolas Sarkozy - whose country holds the current EU presidency - for Europe-wide state intervention on a massive scale.
Instead the package, which the German finance ministry has said will cost €23 billion, is smaller-scale, focusing on tax breaks, state-backed loans for companies and infrastructure projects to keep economic activity ticking over ahead of a hoped-for recovery in 2010.
Berlin also wants to combine the measures with progress on reducing the country's carbon footprint by hiring construction firms to make public buildings such as schools and hospitals more energy efficient, and through tax incentives on cars, particularly low-emission models.
This in turn is aimed at giving a helping hand to Germany's huge but struggling automakers like Volkswagen, Daimler and BMW, who so far have been hit hardest by the global cool-down. Merkel also wants to switch to an emissions-based car tax system.
Berlin has already rushed through a €480 billion rescue package for the country's banks including making available €80 billion in fresh capital to stricken banks to shore up their battered balance sheets.
One casualty of the government's efforts - coupled with an expected fall in tax revenues because of the slowdown - has been Merkel's aim to achieve a balanced federal budget in 2011. Yesterday she said the new aim was to manage this in the next legislative period, which runs to 2013.
