Germany may cap new stimulus plan at €25 billion

The German government plans to limit to €25 billion a second package of stimulus measures to help Europe's biggest economy withstand recession, said a senior regional politician.

The programme's scope is less than the €40 billion previously reported for new projects as Germany wants to stick to eurozone deficit rules and is against encouraging countries like France and Italy to break them, German newspapers reported. Chancellor Angela Merkel is under pressure to do more to boost Germany's economy, already in recession, and politicians and economists have attacked the €31 billion worth of measures already pushed through as insufficient.

She is to consider new measures next month.

Ingolf Deubel, Finance Minister of the western state of Rheinland Palatinate, confirmed the figure of €25 billion for Germany's second stimulus package, which was reported in two German newspapers.

Mr Deubel, who took part in a meeting of officials from Germany's 16 states and Ms Merkel's chief of staff, told the Rhein-Zeitung the package would total some €25 billion, adding it was unclear how much would go to new investments. The Sueddeutsche Zeitung and Frankfurter Rundschau papers also reported the figure of €25 billion had come out of Tuesday's meeting.

Last week, Germany's Der Spiegel weekly had reported the new package would have a volume of around €40 billion.

A Finance Ministry spokesman said no decisions had been made although officials were looking at various options.

The Sueddeutsche reported €10 billion would be used to reduce social security contributions and billions of euros would be available for tax cuts. Billions more would go to public investments, the paper quoted a government source as saying.

Ms Merkel, whose conservative Christian Democrats (CDU) share power with Social Democrats (SPD), has said she will look at possible steps in January, and she meets leaders of the coalition parties on January 5.

The Finance Ministry spokesman reiterated no concrete decisions would be agreed then but the Sueddeutsche said the coalition would officially decide on the plans on January 12.