Germany's consumers feeling worse

Mr Schaeuble had previously criticised Ms Merkel's tax-cutting plans

Consumer confidence in Germany fell in October for the first time since September 2008, according to the GfK economic research institute

Rising petrol prices and forecasts for higher unemployment were blamed for the drop in the index to 4.0 from September's figure of 4.2.

Over the weekend, the new German government promised 24bn euros ($36bn; £22bn) of income tax cuts.

But the finance minister stressed the deficit would have to be dealt with.

Balancing finances

Chancellor Angela Merkel sealed a coalition deal with the Free Democrats over the weekend.

In addition to the cuts in income taxes there will be reductions in business tax rates.

But there were no details given about how the plans would be paid for.

The new finance minister, Wolfgang Schaeuble, criticised Ms Merkel's tax-cutting plans during the election campaign, saying they were unaffordable following the 81bn euros of stimulus measures already in place.

But in interviews since his appointment, he has said that the planned tax cuts are the right thing to do.

He has also said that it will be impossible to balance the budget over the next four years, but that the coalition will soon have to start looking at ways of making savings.