Berlin hopes to fill the budget holes created by the cut through higher borrowing and selling shares from state-owned enterprises.

But the move is likely to further undercut EU rules.

In 2002, Germany breached the Euro-zone rules that proscribe a budget deficit of more than 3% of GDP. German finance minister, Hans Eichel, has announced that Berlin is most likely to breach the terms of the so-called Stability Pact again this year unless there is an "economic miracle".

However, the plan has already been criticised by several experts and the German opposition. They say this plan will put further weight on the country's poorly shaped budget and result in yet larger public debts.

"We will surely vote as expected, that is - not in favour", says Bavarian prime minister and CSU leader, Edmund Stoiber, in the German newspaper, Spiegel Online.

Last week, before the expected announcement on the cuts, European Central Bank chief Wim Duisenberg said that the German government was heading in the wrong direction. "German debts will rise even though they should be falling," he said.

But not all are against this move. "If the proposed tax cuts will not result in a serious increase of the budget deficit, the step is in general a good thing," comments the President of the Bundesbank, Ernst Welteke in the Financial Times Deutschland.