BERLIN - CHANCELLOR Angela Merkel said on Saturday the German government would take 'a further step' in January to boost the economy after passing a stimulus package two weeks ago that was widely criticised as insufficient.

In her weekly podcast, Dr Merkel said the government will do everything possible next year to keep the country's economy on a sound footing. She then went beyond previous signals by saying a second stimulus step would be taken in January.

'The government has already acted and launched a first package of measures to support the economy,' said Dr Merkel, who on Friday said the government would pursue a new package that would focus on infrastructure projects, such as schools and roads.

Previously, Dr Merkel had limited her vow to say government leaders would only meet in January to review the situation.

'We'll take a further step in January,' she said, confirming for the first time concrete measures were on the way.

However, she added: 'They must be carefully prepared because we want to ensure that they are applied in precisely those areas where jobs can be saved or created. Our goal is to make Germany fitter, after the crisis, for 21st century challenges.'

Finance Minister Peer Steinbrueck, in an interview to be published on Sunday in the Welt am Sonntag newspaper, also signalled a change of heart about further stimulus measures after long expressing staunch opposition.

'I'm aware that we can't keep the door to the vault locked - otherwise it'll be kicked down in panic by other people,' Mr Steinbrueck said. 'But what we want to avoid is having to roll out new stimulus measures on a monthly basis.'

Germany, the world's biggest exporter of goods last year and Europe's largest economy, has slipped into recession and could face its worst post-war contraction if it shrinks as much 4 per cent in 2009, as leading economists have forecast.

Dr Merkel, leader of the Christian Democrats, and Mr Steinbrueck, a deputy leader in the Social Democrats, have faced criticism from abroad for their reluctance to contribute more to international efforts to support flagging economic growth.

They have also endured attacks from both their parties for resisting stimulus measures. On Saturday Dr Merkel was criticised again by her Christian Social Union sister party. Deputy CSU leader Karl-Theodor zu Guttenberg said she was too hesitant.

'We've got to watch out that we're not stuck at the very end of the international train,' Mr Guttenberg told the Rheinische Post daily. 'Other countries are leading the train now. The volume planned now is not enough without significant tax cuts as well.' Dr Merkel has ruled out tax cuts before the September election.

Separately, the Leipziger Volkszeitung newspaper reported on Saturday the new stimulus package would be about 20 billion euros (S$29 billion) and earmarked for investment spending.

On Friday, newsmagazine Der Spiegel had reported the next stimulus package would total 40 billion euros - but include the 12 billion euros in the first package approved two weeks ago. -- REUTERS