By Rob Broomby BBC Berlin correspondent

The Berlin city government has agreed a major package of spending cuts designed to stabilise the city's finances.

The city is on the edge of bankruptcy and struggling to cope with debts of 39 billion euros ($34bn).

Berlin's ruling coalition, made up of Chancellor Gerhard Schroeder's Social Democrats (SDP) and the reformed communists' Party of Democratic Socialism (PDS), agreed the package after 11 hours of talks.

The package cuts more than two billion euros ($1.8bn) from the budget between now and 2006.

Mayor Wowereit had promised to tackle financial black hole

It is the largest cuts package in Berlin's history and is designed to save the city from bankruptcy.

The Berlin debt already equals the gross national product of Morocco - tackling it will require courage.

Fifteen-thousand posts will go, though mainly without forced redundancies.

Eleven city swimming pools will close, and heritage funding will be slashed.

Support for the state library, and Europe's largest Latin American library will be cut.

Arts mergers

The forced closure of operas, theatres and museums have been avoided but the arts will not survive unscathed.

The state opera, ballet and the Deutsche Opera ballet will merge.

And there will be cuts in funding to private theatres, and at least one will close.

It is radical surgery, but it may not be enough to stave off disaster.

Baptism of fire

Despite the pain, the five-year plan will make little or no impact at all on the debt itself.

It has been a baptism of fire for the new "red-red" city government.

The reformed communists are determined to prove they are fit to govern and that they can take tough decisions.

But the cuts will not please their voters or those of the governing Social Democrats.

Berlin is still not in the clear.