Berlin - Germany's government on Wednesday approved an anti- recession package of tax cuts and grants that supporters predict will secure up to 1 million jobs over the next two years.

Chancellor Angela Merkel said the move showed her coalition could beat the economic problems expected in the near future.

"We are going to build a bridge toward the possibility that it will get better again in 2010," she said.

But the various measures, expected to load another 12 billion euros onto government budgets, still face scrutiny from the two party blocs making up her coalition government.

In a bid to revive flagging domestic sales of cars, the plans include a year or two of relief from vehicle tax on brand-new cars.

Berlin is also to make grants to local authorities in poor regions, subsidize home insulation and step up roadbuilding. It predicts the measures will encourage German shoppers and businesses to spend an additional 50 billion euros of their own money.

Business hopes to gain from more favourable tax treatment of investment goods. Earlier this week the package had been priced at 15 billion euros, but finance officials said the loss in tax revenue would be more moderate than first thought.

Officials said that together with economic boosts decided last month, the government was now devoting 32 billion euros to warding off recession in Germany, which had a gross domestic product of 2,423 billion euros in 2007. But some experts have been sceptical.

The government won some comfort when independent advisers told it Wednesday that overall tax revenues would not fall next year, but rise about 2 per cent to a total of 
572 billion euros as local authorities pulled in more taxes.

The government costed its planned aid to the troubled car industry at 1.4 billion euros.

The tax relief would apply for one year on all new cars and two years on cars that have especially low emissions of the gases that cause global warming. Vehicle tax is an annual tax charge per vehicle.

Merkel later met with business and trade union leaders to seek public support for the package, which still faces sniping from some in her own Christian Democratic group 
(CDU/CSU) and in the other coalition party, the Social Democrats.

Finance Minister Peer Steinbrueck said action was vital.

Economics Minister Michael Glos said the package would help stop the global financial crisis springing across to the trade economy.

Noting that one sixth of German jobs were connected to the automotive industry, he said the vehicle tax provisions would help carmakers clear their inventories. But environmentalists were angered that cars with large engines could also claim relief.

A Greenpeace banner waving in Berlin Wednesday read, "No tax breaks for climate hogs." (dpa)