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German government's €50 billion plan

Angela Merkel - Deal with coalition partners
Angela Merkel - Deal with coalition partners

The German government has agreed a second stimulus package, which it says is worth €50 billion. It includes a mixture of investments, tax relief and support for companies.

Eight months before an election, Chancellor Angela Merkel's Christian Democrats and the Social Democrats, who share power in a coalition, agreed on steps to help Europe's biggest economy through what may be its worst recession since World War Two.

'This is the biggest package the Federal Republic of Germany has ever seen,' Finance Minister Peer Steinbruck said.

This is Germany's second stimulus plan in as many months and other European nations have also announced programmes. France may pump in more aid on top of what it says is a €26 billion plan. Britain unveiled a £20 billion package in November.

Central to Germany's package is new investment in infrastructure and education which the government hopes will save jobs. The federal government envisages investments of €14 billion, while Germany's 16 states will contribute on top of that.

The package also includes a total of €1.5 billion in aid for the car industry, which experts say accounts for roughly one in five jobs in Germany. Those measures include incentives worth €2,500 for new car purchases.

The coalition partners also agreed on a range of measures to ease the tax burden on households. In the document, they said tax relief would amount to €2.9 billion in 2009, rising to €6.05 billion from 2010.

The entry level tax rate will go down slightly and tax-free thresholds will be raised. There will also be changes to the system of tax brackets which will ease the burden.

The government valued its first stimulus package, agreed in November, at €31 billion, but critics attacked it for being too modest and including previously announced measures.