Germany’s coalition government has agreed a €130bn (£114bn) fiscal stimulus package which cuts tax and hands €300 per child to every family.

The move is designed to kick-start the economy which has been severely hit by the coronavirus crisis.

Germany is heading for its worst recession in 70 years with GDP expected to shrink 6.3% this year.

“We must now succeed in boosting the economy,” said Chancellor Angela Merkel.

She said the fact that Germany had seven million temporarily furloughed workers “shows how fragile the situation is”.

As well as a cut in VAT and cash for families with children, the measures include new incentives for buying electric cars.

The package was announced late on Wednesday after 21 hours of negotiations between the partners in Mrs Merkel’s governing grand coalition – which comprises her own Christian Democratic Union, its Bavarian sister party the CSU, and the left-of-centre Social Democrats.