MercoPress. South Atlantic News Agency

Germany agrees on Merkel's “most difficult decision”

Chancellor Angela Merkel

Germany's cabinet sealed a multi-billion stimulus package on Tuesday aimed at hauling Europe's biggest economy out of what is feared could be its worst slump for six decades.

The raft of measures â€" worth 50 billion euros (66 billion US dollars) over two years â€" is Germany's largest stimulus plan since World War II and includes a huge increase in infrastructure spending as well as sweeping tax cuts. Thrashed out in early January amid political wrangling within Berlin's uneasy "grand coalition" of Chancellor Angela Merkel's conservatives and the centre-left Social Democrats, the package must now be approved by parliament. Merkel â€" heavily criticised from all sides when an initial stimulus package last year was deemed insufficient â€" said later Tuesday that proposing the package was "the most difficult decision I have made in domestic politics." "This package is our answer to the international economic crisis and we believe that the extraordinary international economic situation calls for such extraordinary measures," Merkel told a news conference. Germany would emerge "stronger from the crisis than we were as a country when we entered it," she pledged. The plan forces Germany to take on a significant amount of new debt and Finance Minister Peer Steinbrueck has acknowledged his country will next year break EU rules aimed at keeping down public deficits. Some analysts anticipate it will be Germany's largest post-war deficit Otto Fricke, chairman of parliament's budget committee and a member of the opposition Free Democratic party said: "People here worry about deficits because they ... lead to inflation. And inflation is something you have to be worried about if you have as high a saving rate as Germans do." The crisis has caused tension between industry and the banks, with the former accusing financial institutions of no longer playing their role as lenders to the economy. The mighty BDI industry federation this week came out against any additional public spending. Hans-Peter Keitel, the BDI's new chairman, said the government had "reached the limit of what it can borrow" with its latest fiscal stimulus. Werner Schnappauf, BDI managing director, said on Tuesday that the government "must make it very clear that there is no margin left for additional fiscal measures and make a binding commitment to achieving a balanced budget by 2013."