Germany's future governing parties announced billions of marks of tax cuts yesterday which they said would help the average earner, make the country more competitive and be financed by closing tax loopholes.

"Here we have kept our tax promises," the Social Democratic Party chairman Mr Oskar Lafontaine told a news conference after talks with the smaller Greens party on forming a coalition after Chancellor Helmut Kohl's election defeat last month.

The highest and lowest levels of income tax will be cut by several percentage points over the next four years, personal and child allowances will rise and corporate taxes will be cut.

"With this project we have presented a reform that is solid and financed. It brings the tax relief we promised and relieves businesses too, but will be financed by closing tax loopholes, over 70 of which have been suggested," Mr Lafontaine said.