Germany eyes new stimulus of up to €50 billion

German Chancellor Angela Merkel's coalition met yesterday to agree the framework for a new stimulus package that could inject up to €50 billion into an economy facing its worst recession since WW II.

The three ruling parties have agreed to spend billions of euro in federal funds on infrastructure projects to save jobs, but are at loggerheads over other details, including whether to include tax relief in their second stimulus package in as many months.

The political stakes are high ahead of a federal election in September in which Ms Merkel, leading the Christian Democrats, will face off against Foreign Minister Frank-Walter Steinmeier, her coalition partner and Social Democrat (SPD) leader.

Before the parties began the talks at the Chancellery, a leading member of Ms Merkel's conservatives said they would push for a package totalling €50 billion over the next two years, at the higher end of previous estimates.

"That's a considerable impulse," Mr Volker Kauder, parliamentary leader of Merkel's CDU, told ARD public television.

The SPD has said it favours a programme worth about €40 billion over two years.