The German government needs to cut its debts

Berlin's planned actions, which include freezing civil servants' pay, come despite a projected 8bn euro ($10.2bn; �5.6bn) hole in its finances next year.

The German finance ministry blames this estimated shortfall on a drop in taxes, but says its cost-cutting will work.

Another proposed way to reduce the deficit is scrapping a public holiday.

Cost-cutting

The government wants to move the annual October 3 unification day holiday to a Sunday.

"It's an important signal that Germany is gathering its strength to give the economy a boost," said economy minister Wolfgang Clement.

In addition it aims to help plug the hole in its finances by selling 5.5bn euros worth of securities to investors.

The government said that together these factors will get next year's deficit below the 3% level, despite its tax revenue projections for 2005 being lowered to 450.1bn euros from 453.5bn in the most recent estimates.

It blames the decline in taxes - down to 442.4bn euros this year - on a fall in tax on petroleum products.

Germany, like the other 11 nations that currently use the euro, is bound by the European Union's 1997 Stability and Growth pact, which limits a nation's annual public deficit to less than 3% of GDP.

It is however not the only country to break the rule, with its neighbour France being the other main offender.