Germany Eyes $39 Billion Plan to Boost Economy

Germany plans to introduce a range of steps worth up to about 30 billion euros ($39.17 billion) to boost investment in Europe's biggest economy, cabinet minister Michael Glos said on Thursday.

"We could get to about 30 billion euros with the support package," conservative Economy Minister Glos told reporters on the sidelines of an event in Berlin.

The plans, due to go to cabinet next Wednesday, will include support for the auto sector and building renovation as well as tax breaks enabling companies to write off a share of their investments, several German newspapers reported.

A leading member of the Social Democrats (SPD), who share power with Chancellor Angela Merkel's conservatives, said the government was looking at a package worth up to 25 billion euros.

"All together we are talking about a volume of perhaps 20 billion euros to 25 billion euros," Peter Struck, parliamentary floor leader of the SPD told the Berliner Zeitung.

The government has said it is working on the steps as fears grow that a recession is looming in Germany and that the global financial crisis will hit firms and lead to higher unemployment before next September's federal elections.

Earlier this month, the government announced a 500 billion euro bank rescue package to help restore confidence in the financial system, but Merkel and other politicians want to do what they can to help ordinary Germans.

Environment Minister Sigmar Gabriel said the government would suspend tax on cars with low emissions for up to two years to help the auto industry which is suffering from a drop in demand.

"That will be the suggestion that the finance minister will make," Gabriel told Germany's ARD public television, adding the move would cost about 8 billion euros.

The European Union has also backed a call by Europe's automakers for soft loans to help develop cars which meet tougher CO2 emissions targets.

The Handelsblatt daily cited coalition sources as saying the government would raise the support made available for renovation work to about 2.5 billion euros from 1.4 billion euros in an attempt to boost investment in energy saving measures.

Coalition sources told Reuters the whole program could hit next year's budget by about 8 billion euros.

The government says it still aims to balance the federal budget in 2011 but it is no longer insisting it will reach that goal.

Roland Pofalla, General-Secretary of Merkel's Christian Democrats (CDU), declined to confirm the overall scale of the various measures but he again ruled out a cut in tax rates which some politicians have called for.

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