Berlin - Major German trade unions welcomed Monday an assurance from major industrial groups that they would seek to avoid lay offs next year as the recession worsens.

Chancellor Angela Merkel hosted a seven-hour top-level meeting in her office Sunday of key ministers, business executives, economists and labour leaders to hear calls for the government to step up action against the crisis.

Frank Bsirske, chairman of the main public services union, Verdi, said on the radio station Deutschlandradio Kultur it had been a "constructive" session which achieved a lot.

Berthold Huber, head of Germany's biggest union, IG Metall, said on ZDF television that labour was still demanding more government spending than Merkel wishes to avert the worst effects of recession.

"My impression at the crisis summit yesterday was that everyone making those decisions realizes that more must be invested in infrastructure, education and the environment," he said.

Michael Sommer, chairman of the DGB federation that includes both unions, said the meeting indicated Germany faced its worst recession since restarting its war-ruined economy in 1945.

But he said a short-term boost to consumption before the bigger government investment kicks in was also needed.

Major industrial employers told the summit they would try to persuade industry as a whole to formally undertake not to lay off any staff next year purely because of business losses.

Merkel and other party leaders were expected to issue more detail about the assurances on Monday.

Participants said Merkel was also to order an inquiry into why credit was still tight and German banks still did not trust one another, despite a rescue package offering 480 billion euros (600 billion dollars) in guarantees and credit.

The talks come amidst media reports that Merkel is putting together a new stimulus package which she plans to unveil sometime after the inauguration of US president-elect Barack Obama on January 20.

Merkel has come under fierce criticism in the European Union for her relatively meagre stimulus spending.

Paul Krugman, the US winner of the Nobel Economics Prize, accused her in a New York Times column of "clinging to an out-of-date ideology" and "preventing a common European approach to the economic crisis." (dpa)