PARIS (MNI) - The German government will embark on a fiscal austerity program, cutting E10 billion a year from the federal budget from 2011 until 2016, the Financial Times reported Monday, citing unnamed government officials.

The measures, which will include spending cuts, lower subsidies to states, and higher taxes, are intended to comply with Germany's new constitutional law requiring that annual public deficits be contained to no more than 0.35% of GDP by 2016. It is also meant to serve as an example to other Eurozone countries whom Germany has repeatedly exhorted to cut deficits in order to respect the EU's 3%-of-GDP deficit limit.

Germany expects to run a deficit exceeding 5% of GDP this year, and hopes to slash it to 3% by 2013. The country is expected this year to have a record-high net borrowing requirement of E80 billion, which it also wants to reduce starting next year.

The magnitude of Germany's planned cuts are unlikely to be greeted warmly by fellow EMU members, who have hoped that Germany would help stimulate demand to provide some breathing room for countries that are mired in deficits much bigger than the German one and undertaking draconian consolidation efforts.

The coalition government of Germany's Chancellor Angela Merkel had promised tax cuts. But now tax increases, as well as the abolition of tax exemptions, are on the table instead.

Merkel has called for a closed-door conference of her coalition partners in two weeks' time to lay out the guidelines for the cuts to be included in the 2011 budget, the FT said. There are already strains emerging among coalition partners over where the cuts should fall.