Germany to set up 100-billion-euro fund for firms: Merkel

BERLIN: Germany is poised to unveil a multi-billion-euro fund to aid companies unable to raise loans from banks wracked by the credit crisis, Chancellor Angela Merkel said.

The package -- worth some 100 billion euros (USD 135 billion) -- is designed to tide otherwise healthy firms over until normal levels of bank lending resume, she said in an interview with Bild am Sonntag to appear Sunday.

"We do not need 100 billion euros of new money because this is about guarantees," Merkel was quoted as saying.

Berlin has already established a 400-billion-euro loan guarantee fund for banks affected by the global financial crisis.

Banks wishing to make use of the guarantee must adhere to conditions such as a restriction on executive salaries but loans to companies will not come with strings attached, Merkel said.

The scheme is part of a raft of measures expected to be finalised at a crunch meeting of Merkel's "grand coalition" government on Monday.

Other proposals may include a cut in the base rate of income tax from 15 per cent to 12 per cent, a spokesman for Finance Minister Peer Steinbrueck revealed earlier today.

Merkel is under increasing pressure to pull Germany out of what analysts fear could be its most painful economic slump in 60 years.

Berlin has been widely criticised for a tentative approach to the financial crisis.