GERMANY HAS signed off on a new €50 billion economic stimulus plan, borrowing record sums to tackle a recession economists say will be the worst in the country’s post-war history.

The package, running over two years, includes €18 billion in infrastructure spending as well as tax-cuts and tax-breaks, reduced healthcare contributions and bonuses for families with children.

The package comes two months after an initial €31 billion package was criticised for containing just one-third new spending.

After coming under pressure from London and Paris to do more, Berlin declined, saying the economic crisis had yet to make itself felt.

Now, a month after lambasting “senseless competition for billions” in stimulus programmes, a sober chancellor Angela Merkel conceded yesterday the new year had brought alarming new economic conditions, and that the time had come to act.

“What we are now experiencing in the labour market and in new orders is dramatic, and it seemed important that we use all instruments at our disposal,” she said.

“We only acted when we were firmly convinced of the depth of the crisis.

“Our particular aim in Germany is to emerge from the crisis stronger than when we went in.”

Economists welcomed yesterday’s package and said it would ensure that, after breaching the euro zone rules this year, new borrowing in Germany would soon be under control.

To retain confidence in Germany’s fiscal discipline, the government plans to create a new constitutional limit on net borrowing of just 0.5 per cent of gross domestic product, to take effect from 2015.

Finance minister Peer Steinbrück, who last month attacked Britain’s economic programme as “crass Keynesianism”, said Berlin’s plan wouldn’t prevent recession but would limit its severity.

“Along with the steps we took back in November, this is the biggest growth package since 1949,” he said.

“We are talking about a fiscal boost of over €80 billion.”

Reaching agreement on the plan was a delicate business for Germany’s grand coalition, one week before the rerun of an important state election and nine months before the general election.

The complicated package contains enough for each side to describe as a policy success for their party.

The Social Democrats (SPD) welcomed the infrastructure and family spending.

Dr Merkel’s Bavarian allies, the Christian Social Union (CSU), had demanded tax cuts and got a one-point cut to the lowest tax rate.

Dr Merkel’s own Christian Democrats (CDU) have welcomed a €100 billion state guarantee fund for companies experiencing trouble getting credit.