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Business Europe

Berlin 'planning' new rescue package to curb recession

Latest update : 2008-12-24

Two German newspapers said the government in Berlin was working on a new 25-billion-euro rescue package to shore up an economy already in recession, though a spokesperson for the Finance Ministry said no decision had been made.

REUTERS - Germany's government is planning a package of measures worth 25 billion euros, less than the 40 billion euros previously reported for new projects, to help Europe's biggest economy withstand recession, newspapers reported on Wednesday.

The Sueddeutsche Zeitung and the Frankfurter Rundschau papers said the 25 billion euro ($35 billion) plan was the result of a meeting between officials from Germany's 16 federal states and Chancellor Angela Merkel's chief of staff on Tuesday.

Germany has already pushed through measures it says are worth 31 billion euros but Chancellor Angela Merkel's government is under pressure to do more to boost the German economy, which is already in recession.

Some economists predict it is facing the deepest downturn since World War Two.

The Sueddeutsche Zeitung reported that some 10 billion euros would be used to reduce social security contributions and there would also be billions available for possible tax cuts.
Further steps could include measures such as a bonus for people who scrap their old car.

"Several billion euros will be available for investments," the Sueddeutsche Zeitung quoted a government source as saying.

Neither newspaper quoted any other sources.

Previously, Germany's authoritative Der Spiegel magazine had reported the new stimulus package would have a volume of around 40 billion euros.

Merkel has said she will consider further possible steps in January and she is to meet leaders of the coalition parties on Jan. 5.

It seems most likely that the government will agree on making available further money for investments in infrastructure projects.

Some economists and politicians have called for tax cuts but Merkel has so far said there will be no reductions before September's election.
Merkel's conservative Christian Democrats (CDU) share power with the Social Democrats (SPD).

A Finance Ministry spokesman said no decisions had yet been made on further steps. Officials are, however, looking at various options. The spokesman reiterated that no concrete decisions would be agreed on Jan. 5.

Date created : 2008-12-24