BERLIN - CHANCELLOR Angela Merkel urged German banks on Sunday to make use of a government bailout fund worth up to 500 billion euros (S$944.7 billion), which few institutions have tapped yet.

'The government reacted quickly and decisively to the international financial markets crisis - with a comprehensive stabilization package,' Ms Merkel said in her weekly video podcast.

'Now our banks and financial institutions need to utilise this package.'

The bailout plan approved last month by Ms Merkel's government includes conditions for using the money, including a salary cap of 500,000 euros for managers at banks that participate - although some officials have suggested the cap might be flexible.

Public-sector bank BayernLB was the first to take advantage of the offer, when officials there said last week it was seeking 5.4 billion euros from the fund.

Hypo Real Estate AG became the first private institution to participate on Wednesday when it requested a 15 billion euro credit line, meant to guarantee its short-term lending activity until it receives a larger bailout in a few weeks.

The government had previously agreed to prop up Hypo in a separate plan worth up to 50 billion euros.

Ms Merkel also said in the podcast that her Cabinet would approve a second package of intervention measures on Wednesday meant to bolster the economy.

'We know that the international financial markets crisis will also have an impact on our economy,' she said. 'However, we want the impact on our economy to be limited.'

Possible measures for the new package that officials have floated include transport infrastructure projects, the extension of a program to restore old buildings and tax incentives to buy environment-friendly new cars.

Mr Peter Struck, the parliamentary leader for the Social Democrats, who share a governing coalition with Merkel's Christian Democrats, said last week that the new package could be worth 20-25 billion euros over the next two years. -- AP