German government approves stimulus package

The package of tax breaks and spending measures, most to take effect over the next two years, is aimed at triggering investments of up to 50 billion ($64 billion), Economy Minister Michael Glos said.

"We want to strengthen the real economy's powers of resistance and we know, of course, that the next year will not be easy in economic terms," Glos said at a news conference.

The legislative proposal, which is expected to cost the government 23 billion euros ($29 billion) through 2012, comes after the government last month drew up a separate program worth as much as 500 billion euros ($640 billion) to shore up Germany's banking sector, offering capital injections and credit guarantees.

The stimulus package includes a one-year holiday on tax for new cars, and a two-year holiday for tax on the most environmentally friendly vehicles.

"We know what significance the automobile industry has for our country--every sixth job is connected with it, and so it is a particular concern," Glos said.

Germany is home to car makers such as Daimler AG, Porsche SE, Volkswagen AG and BMW AG. Automakers across Europe have scaled back production as the financial crisis prompts consumers to hold off purchases. The package also includes a 15 billion-euro ($19 billion) program to help ensure that small and medium-sized companies are kept flush with credit while banks remain reluctant to lend.

The government plans to pump an additional 3 billion euros ($3.8 billion) into a program aimed at making buildings more energy-efficient; and 2 billion euros ($2.5 billion) into transport infrastructure projects. Germans will be able to claim tax breaks for having their homes renovated to make them more environmentally friendly.

In an effort to keep people in jobs, the government also plans to extend from 6 to 18 months the period over which employees put on reduced working hours can claim benefits to top up their income.

The package needs parliamentary approval, but the coalition government of conservatives and Social Democrats has a large majority.