Germany's second stimulus package, which the government says is worth 50 billion euros ($67.02 billion), includes a mixture of investments, tax relief and support for companies, the agreement shows.
Eight months before an election, Chancellor Angela Merkel's conservatives and the Social Democrats (SPD), who share power in a coalition, agreed on steps to help Europe's biggest economy through what may be its worst recession since World War Two.
"This is the biggest package the Federal Republic of Germany has ever seen," Finance Minister Peer Steinbrueck told German broadcaster WDR.
This is Germany's second stimulus plan in as many months and other European nations have also announced programmes. France may pump in more aid on top of what it says is a 26 billion euro plan. Britain unveiled a 20 billion pound package in November.
Economists broadly welcomed Germany's plans, though some are worried about the impact on the budget and say some of the steps may take effect too late.
"It's right and good that we have a stimulus package in the current difficult environment, even if it will increase debt levels. One can argue about the contents. This is a combination of numerous, small measures," said Michael Heise, chief economist at Allianz.
Central to Germany's package is new investment in infrastructure and education which the goverment hopes will save jobs. The federal government envisages investments of 14 billion euros and Germany's 16 states will contribute on top of that.
The package also envisages a total of 1.5 billion euros in aid for the auto industry, which experts say accounts for roughly one in five jobs in Germany. Those measures include incentives worth 2,500 euros for new car purchases.
The coalition partners also agreed on a range of measures to ease the tax burden on households. In the document, the coalition parnters said tax relief would amount to 2.9 billion euros in 2009, rising to 6.05 billion euros from 2010.
The entry level tax rate will go down slightly and tax-free thresholds will be raised. There will also be changes to the system of tax brackets which will ease the burden.
Peter Struck, SPD parliamentary floor leader, told German television the package would ease the tax burden.
"With this package we can achieve our goal of emerging from this crisis as best we can."
The government valued its first stimulus package, agreed in November, at 31 billion euros, but critics attacked it for being too modest and including previously announced measures.
The impact of the package will be crucial to Merkel who is seeking re-election in September. She had originally resisted pressure to bring in further measures, especially tax cuts.
Opposition leader Guido Westerwelle, head of the liberal Free Democrats (FDP), also attacked the new plans.
"This package, as it has been presented so far, won't have enough of an effect," he told the Muenchner Merkur newspaper.
