(RTTNews) - In Europe’s largest fiscal stimulus to date, the German coalition government on Monday agreed on a package amounting to about EUR 50 billion. The amount, to be officially announced on Tuesday, is to be utilized over two years and includes public investments in railways, roads and schools, social security contributions as well as EUR 18 billion worth of deductions in taxes and other levies. The country had announced a EUR 32 billion or $41 billion economic stimulus plan in December, 2008.

In the latest package, the largest single fiscal stimulus in Germany’s post-war history, about EUR 17 billion is earmarked for public infrastructure investment, part of which would be financed by the country’s 16 regional governments.

The package is expected to include a EUR 100 billion program for companies struggling through the credit crisis, reductions in state health care contributions and bonuses of EUR 100 per child and a EUR 2,500 payment for scrapping a car older than nine years and buying a new vehicle.

Christian Democrat parliamentary president Volker Kauder reportedly said the package would help the country through the financial crisis and secure jobs.

Reports had suggested on January 5 that Germany was mulling a second stimulus plan. The ruling conservative party’s parliamentary floor leader Volker Kauder had said then that European Union rules allowed for a budget deficit of 3% of GDP, which gave room for EUR 25 billion per year. According to the reports, the plan was likely to be funded jointly by the federal and state governments.

Although the need for the stimulus package was widely recognized, the ruling party and the opposition social democrats were split on the exact measures to be taken to help the economy. Safeguarding jobs and promoting investments were central to the stimulus plan, Chancellor Angela Merkel had said.

Germany, the biggest Eurozone economy, has not been immune to the global financial crisis. The country’s unemployment rose for the first time in almost three years in December as the economy fell in to a recession. Data released by the Federal Labor Agency showed last week that the number of unemployed rose a seasonally adjusted 18,000 in December. The number exceeded the expected figure of 10,000.

Monday, the German Federal Statistical Office announced that the turnover in manufacturing declined a working day adjusted 6.4% year-over-year in November, compared with a revised 3.2% fall recorded in October.

Germany is highly reliant on exports and the economic crisis had resulted in demand decrease for German goods like cars and machine tools. Exports saw the largest drop in November 2008, since reunification in 1990. According to provisional data released by the Federal Statistical Office, exports declined at a faster pace of 10.6% month-on-month in November after falling only 0.6% in October.

Daimler, one of Germany’s largest carmakers, said recently that it would put a fifth of its workforce, numbering about 35,000, on to a four-day working week across its six German plants to tackle the drop in demand abroad.

Germany entered into a recession for the first time in five years by contracting 0.5% in the third quarter, following a decline of 0.4% in the second quarter.

In order to tackle recession, British Prime Minister Gordon Brown Monday promised GBP 500 million to encourage hiring and pledged to help thaw lending.

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