Cash Injection German Parties Nearing Deal on Massive Stimulus Package

After five hours of talks on Monday, Germany's ruling parties said they were nearing agreement on a new economic stimulus program totalling up to €50 billion. They still disagree on whether to cut taxes but expect to reach a deal by January 12.

Germany's ruling coalition parties came closer on Monday night to agreeing a new stimulus package   of up to €50 billion ($68.4 billion) to help Europe's largest economy weather the looming recession, but they remain divided over whether the package should include tax cuts.

After five hours of talks in Berlin, the leaders of Chancellor Angela Merkel's conservative Christian Democrats (CDU) and of the center-left Social Democrats said they agreed on most main points to spend public money on infrastructure projects such as school refurbishment and road building to protect jobs and spur growth.

The party leaders said they were confident they could reach a final deal at their next scheduled meeting on January 12, even though they remain divided on whether to cut taxes as part of the program.

The SPD opposes conservative demands for an increase in the tax-free threshold -- effectively a tax cut -- and other measures to lighten the tax burden. Instead, the SPD wants to lower welfare contributions, and is even calling for higher taxes for high earners.

"An agreement by next Monday is possible," said Volker Kauder, the CDU's parliamentary floor leader.

Merkel's government pushed through a €31 billion package only last month but critics dismissed it as too small.

She was initially opposed to tax cuts but has since bowed to pressure from her allies in the Christian Social Union, the Bavarian sister party to her CDU, which had insisted on lightening the tax burden.

Despite criticism of her handling of the financial and economic crisis so far, Merkel remains the country's most trusted politician ahead of a year that will see numerous regional elections culminating in the general election in September.

A poll by the Forsa institute released last week showed Merkel topping the list of politicians Germans trusted the most with 63 out of 100 points, ahead of her main rival Frank-Walter Steinmeier, Germany's foreign minister and the SPD's candidate to run against her in September. But Steinmeier is close behind at 60 points.

cro -- with wire reports
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