Germany has created a new bailout to boost the economy
The German coalition government has agreed a € 130bn (£ 114bn) rescue package that will cut taxes and give each family € 300 for each child.
The move aims to revive an economy that has been hit hard by the coronavirus crisis.
Germany is headed for the worst recession in 70 years and GDP is set to decline by 6.3% this year.
"Now we must succeed in boosting the economy," said Chancellor Angela Merkel.
The fact that Germany has seven million temporary layoffs, she said, "shows how fragile the situation is."
In addition to reducing VAT and cash for families with children, these measures include new subsidies for the purchase of electric cars.
The package was announced late Wednesday after 21 hours of negotiations between partners of Merkel's ruling coalition, which consists of its own Christian Democratic Union, the CSU's Bavarian sister party, and the left-wing Social Democrats.
To increase consumer spending, VAT will be cut from 19% to 16% from July 1 to December 31 this year, costing the German government € 20 billion.
Families will receive a one-time transfer of EUR 300 for each child.
Meanwhile, those who buy electric cars will receive a government rebate - designed to encourage consumers to switch to environmentally friendly vehicles. This discount will be doubled compared to the previous one and will amount to 6,000 euros.
Businesses will also benefit from this. Firms in the sectors most affected by the crisis - such as hospitality, tourism and entertainment - will receive € 25 billion of 'bridging aid' from June to August.
Restaurants, hotels or event organizations can recover up to 80% of their fixed operating expenses if their revenues fall by more than 70% compared to last year.
The new stimulus package complements the € 1.1 trillion bailout package agreed in March, which included loan guarantees, subsidies and a shorter working hours program to avoid job cuts.
Merkel said the support program will help "the economy get back on its feet and grow again".