Germany's coalition parties meet on Monday to hammer out a framework for a second stimulus package worth up to 50 billion euros to help Europe's biggest economy weather its worst recession since World War Two, reported reuters. The parties, including Chancellor Angela Merkel's conservatives and the Social Democrats (SPD), agree on boosting spending on infrastructure projects to save jobs but are at loggerheads over other details, including possible tax cuts. The political stakes are high as voters will deliver their verdict in a federal election in September. A leading member of Merkel's conservatives said the package could total about 50 billion euros ($69.63 billion). "The package we (the conservatives) will present ... will have a volume of around 50 billion euros for 2009 and 2010 together, that's a considerable impulse," Volker Kauder, parliamentary leader of Merkel's conservatives, told ARD public television. He said Germany had room to spend about 25 billion euros per year without busting the EU's stability and growth pact rules. The SPD has said it favours a programme worth about 40 billion euros. Previously, government officials have said the second package is likely to total around 25 billion euros, although it was unclear what timeframe they were referring to. Monday's meeting, due to start at 1300 GMT, will lay the groundwork for a deal between coalition parties but another meeting is scheduled for Jan. 12 at which the details are likely to be agreed. The coalition parties have different priorities for the measures they want to bring in but both agree government spending should go towards infrastructure projects and schools. "I think we have a good deal of overlap and that in a week's time we will achieve an appropriate and sensible result," Ronald Pofalla, General Secretary of the Merkel's Christian Democrats (CDU), told German radio. Late on Sunday, Merkel bowed to pressure from her conservative allies from the southern state of Bavaria who insisted that tax relief be included in the package. The two conservative parties agreed to propose lifting the income tax threshold to 8,000 euros from 7,664 euros and start eliminating "cold progression", under which taxpayers are bumped up into higher tax brackets even if real incomes have not grown. This process happens in Germany because tax brackets are not automatically adjusted for inflation. The SPD supports cuts in health insurance fees, higher child benefits and also wants incentives for people who get rid of old, fuel-guzzling cars. But it is against tax cuts and has even said it wants to raise the top income tax rate. "It will be very difficult to get a common denominator on tax," Andreas Nahles, deputy leader of the SPD, told German radio. Merkel's government pushed through a 31 billion euro package last year but critics have attacked it for being too modest, as it contained a number of measures which had been already planned and had only 12 billion euros of new spending. Germany entered recession in the third quarter of last year and many economists predict the economy will shrink by 2 percent or more this year, which would be the worst annual performance since World War Two.
