The proposals came from a special working group set up by the center-right government to draft proposals for a financial market tax, daily newspaper Rheinische Post wrote on Tuesday. The publication cited an undisclosed source in the government.

Chancellor Angela Merkel and her junior partner in the coalition government, the liberal Free Democratic Party (FDP), reportedly agreed on the introduction of a tax during a strategy meeting on Monday.

The source said the tax was not designed as a levy on financial market transactions, but added that the government was eager to make financial markets pay the clean-up costs of the financial crisis in Europe.

A financial transaction tax has been a key demand of Germany's opposition parties. They previously promised to make support of the EU fiscal compact contingent on whether such a tax is introduced.

According to the Rheinische Post, FDP parliamentary leader Rainer Brüderle vehemently opposed a financial transaction tax during the meeting. He reportedly argued that the tax "doesn't make sense" as it would "primarily burden consumers instead of the financial sector."

Berlin was reportedly prepared to introduce its newly-designed financial market tax together with a group of "willing countries" interested in pushing ahead with the levy despite resistance from other EU members, notably Britain.

Stimulus spending

Another part of the German government's strategy for winning the opposition over to the EU fiscal pact was an economic stimulus package for crisis-hit eurozone countries, the Reuters news agency reported Tuesday.

Reuters said it had obtained a government document outlining a series of proposals aimed at kickstarting ailing eurozone economies, especially in the EU's southern periphery.

The news agency said the proposals included a capital increase for the European Investment Bank (EIB) to shore up funding for infrastructure projects.

Germany was also reportedly planning to push for more freedom in using EU structural and cohesion funds to fight youth unemployment in Europe.

Reuters said Merkel wanted to streamline fiscal and economic policies of eurozone members in order to make them better coordinated and more binding.

uhe/srs (Reuters, AFP)