Berlin- Chancellor Angela Merkel's cabinet on Tuesday approved Germany's biggest postwar fiscal stimulus package, earmarking 50 billion euros (65 billion euros) over the next two years to help drag the country out of recession.

Key elements include public investment in infrastructure projects such as roads and schools as well as cuts in income tax and contributions to health and unemployment insurance.

There are also increased benefits targetted at families as well as incentives for motorists aimed at propping up the country's struggling car industry.

To finance the package, the government is expected to announce a supplementary budget for 2009, which will see an increase of 36.8 billion dollars in net borrowing.

The package, which adds to a 31-billion-euro stimulus announced late last year, comes as the country is facing its steepest economic decline since World War II.

Analysts predict the economy could contract by as a much as 3 per cent in 2009.

Germany, one of the world's leading exporters, has also been hit by a dramatic decline in orders from abroad.

In December, the number of people out of work rose for the first time in 33 months.

The lower house of parliament, the Bundestag, is due to begin debating the package on Tuesday, with a vote expected to be taken on February 13. (dpa)