A woman walks past a restaurant in Berlin, capital of Germany, May 26, 2020. The German federal government and the 16 states have agreed in principle to keep coronavirus contact restrictions in place until June 29, the Federal Press Office announced Tuesday night. (Photo by Binh Truong/Xinhua)

Germany will plough 130 billion euros ($146 billion) into a stimulus package to kick-start an economy severely hit by the coronavirus pandemic, German Chancellor Angela Merkel said on Wednesday.

Under the wide-ranging measures outlined in a 15-page document, value-added tax will be temporarily slashed, families will receive 300 euros for each child, while those who purchase electric cars will see a government rebate doubled to 6,000 euros.

"The size of the package will reach 130 billion euros for 2020 to 2021, 120 billion of which will be borne by the federal government," said Merkel.

The fresh stimulus comes on top of a massive 1.1-trillion euro rescue package already agreed upon in March, comprising of loan guarantees, subsidies and a beefed-up shorter-hours program to avoid job cuts.

To fund the unprecedented package, parliament had approved new borrowing, marking a sea change in German economic policy, upending a financial-crisis-era constitutional rule drastically limiting budget deficits.

With borders slamming shut, employees kept home, and shops and restaurants forced to close to halt transmission of the coronavirus, Germany is headed for the worst recession in its post-war history. 

Disruptions to trade and travel have also weighed on the export powerhouse.

Latest data released earlier Wednesday showed that the unemployment rate rose to 6.3 percent in May.

With new infections sharply dropping, Europe's biggest economy began easing social restrictions in May, allowing shops to reopen while restaurants and tourist businesses are taking the first tentative steps. 

AFP