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A senior government official said on Friday, the German cabinet has agreed to temporarily reduce value-added tax (VAT) and give parents a cash handout of EUR300 per child as part of its EUR130 billion economic stimulus package, per Reuters.

The official said: “Chancellor Angela Merkel’s cabinet agreed at a special meeting on Friday to cut VAT to 16% from 19% for all goods from July 1 until Dec. 31 in a bid to boost consumption – a measure is set to cost around 20 billion euros.”

Separately, Reuters reported, citing another senior official with knowledge of the discussions, German Finance Minister Olaf Scholz is considering borrowing up to another EUR50 billion to finance the country’s massive stimulus package.

EUR/USD cheers the German news

The shared currency remains strongly bid in the European session, mainly driven by broad-based US dollar weakness, as the risk sentiment improves. However, the EUR traders also cheer the German stimulus update.

At the time of writing, EUR/USD rises 0.30% to 1.1330, having reached a daily high at 1.1341 in the last hour.

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