Future Plans

Germany expects tough negotiations when EU leaders meet on December 11 and 12 to decide on measures to combat the global financial crisis, as well as a climate-change package, Chancellor Angela Merkel said.

Addressing the lower house of parliament, Merkel said the proposals by the EU Commission for a 200 billion euro ($252 billion) stimulus package were a step "in the right direction."

She dismissed claims that Europe's largest economy was not doing enough to deal with the crisis, saying Germany would not be drawn into "a competition for subsidies and the spending of billions" in state aid.

Berlin's contribution to the EU scheme is a 32 billion euro stimulus package over the next two years which is expected to result in a 50 billion euro boost to consumption and investment, she said.

Package passes in parliament

The measures include higher family allowances and tax breaks for children as well as steps to encourage investment in energy-efficient buildings and incentives for car buyers, but not tax cuts.

The first part of the package was adopted in October and the second part, worth 12 billion euros, was approved by the lower house, or Bundestag, on Thursday, Dec. 4.

The EU plan calls for governments to help mobilize the equivalent of 1.5 per cent of the bloc's overall gross domestic product. Germany says its share would put 1.25 per cent of GDP in the hands of consumers.

Defending her prudent fiscal approach, Merkel said her government would review the stimulus measures in January to see if further action was necessary

Critics deride tax choice

Opposition parties criticized the chancellor for not agreeing to slash taxes as part of a broader package. "You are driving on the wrong side of the road in Europe," said Free Democrat leader Guido Westerwelle.

Merkel said Germany would use the Dec.11-12 gathering in Brussels to press for changes to subsidy rules and exemptions in investment support for projects such as extending fast internet connections to rural areas.

The chancellor welcomed the compromise reached this week in the EU on vehicle emissions, which envisages that automakers will have to reduce carbon-dioxide outputs from new cars to 130 grams per kilometer between 2012 and 2015.

She said she expected a lively discussion at the summit on the wider issue of emissions, saying Berlin would "forcefully present its own position so that jobs are not lost in Germany."

Merkel stands by EU climate targets

Germany wanted the summit to be a success, she said, but there needed to be exceptions for energy intensive industries.

The chancellor said Germany stood by the EU's climate targets of a 20 percent cut in CO2 emissions, 20 per cent more energy efficiency and a 20 percent share of renewable energy.

Moreover, Merkel warned the EU's efforts to lead the way on climate change would fail without a "sensible" global deal in 2009 that involved the United States.

"Europe accounts for 15 percent of the world's CO2 emissions," Merkel told parliament in a speech that was also a warning shot ahead of the summit.

"If the United States does not participate, if we don't agree next year on a sensible international deal, then our efforts in Europe to lead the way will of course fail."