German government finalizing EUR 50 bln rescue package today, which is centered around a EUR 10 bln increase in public infrastructure investment and likely to include higher benefits for long-term jobseekers and families as well as a cut in health insurance contributions. The latter is likely to be compensated, however, by rising contributions to the health fund. Under discussion are also tax cuts, which are likely to lift the tax free basic income and reduce the income tax level of Germany's progressive tax scale. SPD demands for a raise in the highest tax rate are likely to be rejected, however. The government is also likely to agree to a EUR 100 bln fund to help companies with guarantees and credits. The conservative CDU yesterday signaled that it also wants to allow the government to directly take over stakes in large non-financial companies, not just banks, as the current financial stabilization fund foresees. However, the SPD has rejected such a plan and even the DIHK chambers of industry and commerce has been skeptical, partly because it will be difficult to help Germany's bulk of small and medium sized companies that are not public companies, in this fashion. As coalition partners CDU and SPD are still trying to find a compromise there is already criticism that the focus on long term infrastructure investment will mean help will come too late to prevent a sharp decline in German growth, as export demand breaks off.

U.K. Government to Hold 43.4% of Lloyds TSB After HBOS Aquisition

The U.K. government will own around 43.4% of the enlarged issued ordinary shares of Lloyds TSB after the acquisition of HBOS has come through. The government would hold around 57.9% of HBOS of the enlarged issued ordinary shares. Trading in HBOS shares are expected to be suspended as of 6pm Wednesday. Existing shareholders largely shunned the banks' rights offer, with just 0.5% and 0.24% of offered shares being bought in Lloyds TBS and HBOS respectively, leaving the government to pick up the rest.