The German government is to cut its budget by 10 billion euros ($13bn) a year until 2016 in order to set an example for the eurozone and to comply with the budget deficit rules in the constitution, a British newspaper has reported.

Citing unidentified government officials, the FT reported that the cuts could be achieved through tax increases as well as reduced spending, despite a promise by the coalition government to put tax cuts at the centre of the plan.

The government would mainly target lower subsidies for Germany’s federal states as well as abolish tax exemptions and allowances, the newspaper said.