Germany is making the biggest cuts in government spending for more than half a century to reduce the country's debts. The Chancellor Angela Merkel said Germany needed to set a good example to other European countries as sound finances were the best way to avert another crisis. Steve Rosenberg reports.

The government wants to save more than $95 billion over the next four years. To do that, there will be cuts to social welfare payments. The cost of health insurance will rise, and the armed forces will be reorganised to save money. There will be new taxes, including a bank levy, a tax on the nuclear power industry and a travel tax on air passengers. Meanwhile, plans to rebuild from scratch a famous Prussian palace in Berlin have been postponed. That's a luxury the German budget can't afford right now.