Germany's grand coalition partners, rushing to finalise their left-right political alliance by tomorrow, yesterday said companies' non-wage labour costs would be cut to spur job creation. The move is aimed at deflecting growing public criticism of planned tax rises.

Unemployment insurance contributions will be cut by up to two percentage points from the present 6.5 per cent of gross wages, according to Ronald Pofalla, a key ally of Angela Merkel, the Christian Democratic Union's chancellor-in-waiting.