(RTTNews) - Germany’s coalition government has agreed for Europe’s largest fiscal stimulus, worth more than 50 billion euro over the next two years, with a focus on investments in education, railways, roads and a larger-than-expected cut in tax and social security contributions.

The stimulus package is said to include 18 billion euro or US$24 billion worth of cuts in taxes and other levies, spread over 2009 and 2010. Reduction in taxes in the package include a reduction in the lowest income-tax rate to 14% from 15% and a cut of 0.6 percentage point in health insurance.

These measures are expected to bring monthly contributions from gross wages down to 14.9%. The cut in income tax is expected to lower the tax burden, mainly to the lower and middle-income groups, by 9 billion euros a year.

The package also includes a one-off 100-euro bonus in children’s allowance, and a 2,500-euro scrapping bonus for cars older than nine years.

This is the second German stimulus program in two months and comes after lawmakers agreed to a 32 billion euro package in November that included subsidies, tax relief for families and construction investment.

The agreement came after German automaker Daimler said it would put a fifth of its employees on to a four-day working week due to falling global demand. The decision was expected to impact 35 thousands workers across six German plants.

Volker Kauder, parliamentary leader of Merkel’s CDU said, assuming early parliamentary approval the package of measures are expected to come into force on July 1.

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Posted in Categories: Economy, Eurozone, Releases, USA.

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