THE German government yesterday defied protests from trade unions and opposition politicians to announce massive spending cuts and social welfare changes. Leaders of the Christian Democrats and Liberal Free Democrats agreed the package at a meeting chaired by Chancellor Helmut Kohl after the collapse on Tuesday night of government-sponsored talks with employers' representatives and trade unions.

The measures include a pay freeze for public sector workers and a 20 per cent reduction in sick pay for all workers. Prescriptions charges will be increased and every German worker's entitlement to a rest cure at a spa resort every three years is to be reduced. Old-age pensions will be calculated according to a system that takes into account fewer years spent in education than at present, effectively reducing the pensions of the better-educated. Disability pensions and unemployment benefit will also be cut and children's allowances are to be frozen.

The most controversial measure allows firms employing up to 10 people to sack workers at will. Members of the opposition Social Democrats warned that their party's majority in the upper of parliament would not enable them to block this measure.

Dr Kohl appealed yesterday to the German nation to pull together to secure the country's future but his reform plan has already run into trouble within his own party.

Left-wing Christian Democrats were complaining that the cuts were an attack on Germany's entire welfare system. Trade unions have threatened to strike and the Social Democrats have vowed to fight the plan at every turn.