No to Fat Cats

But it was one of the few points of agreement to emerge from six hours of tough negotiations at the Chancellor's office.

Under the new proposals, companies' supervisory boards would be obliged to cut managers' salaries if the firm was performing badly.

Managers will also be required to retain their share options for four years instead of two. This measure is intended to encourage executives to adopt a more sustainable, longer-term approach to their business.

In addition, Angela Merkel's Christian Democrats and its junior governing partner, the Social Democrats, agreed that rises in managers' pay must be determined by the entire supervisory board and not just a small coterie. The coalition are to formulate further measures relating to managers in a working group over the coming weeks.

Disagreement on a number of matters

But the CDU rejected the SPD's call for curbs on executive pay. The Social Democrats had wanted firms only to be able to write off salaries and redundancy payments against tax if they did not exceed a million euros.

The parties were also unable to reach agreement on the introduction of minimum pay for temps and a reform of the Job Centers for the unemployed.

The conservatives parliamentary party leader Volker Kauder expressed disappointment with the outcome of the meeting in the chancellery. "We have achieved something, but, of course, it could have been more," he told Germany's public broadcaster ARD.

Peter Ramsauer, from the CDU's Bavarian sister party, the CSU, was more negative, describing the talks that went on into the early morning as the "hardest" and the "toughest" since the government took office three-and-a-half years ago. "This foreshadows the end of the coalition," said Ramsauer, alluding to the coalition's increasing difficulty to reach compromise as the parties gear up for Germany's September elections.

Election? What election?

But SPD parliamentary party leader Peter Struck dismissed Ramsauer's comments as "nonsense", saying he had experienced "tougher" talks. "We have to work hard that's why we are elected," he said.

German finance minister Peer Steinbrueck also struck a positive note, saying that the coalition had made progress in achieving such a broad consensus on financial matters. "These are very pleasing results to come out of the coalition committee meeting, " he stressed on Thursday.

Other measures agreed at the meeting included the introduction of a number of regulations relating to environmental matters. The cabinet plann to pass laws on nature and water conservation and radiation protection on March 11.