BERLIN (AP) – Pinning his hopes on consumers to revive Europe’s largest economy, Chancellor Gerhard Schroeder announced plans Sunday to accelerate a tax cut to send a “signal of revival” to citizens unsettled by reductions in Germany’s generous welfare state.

Schroeder, whose Cabinet approved the tax proposal during a three-day retreat to discuss the weak economy, said the program would spur growth by returning $28.5 billion a year to taxpayers.

“Reforms sometimes hurt, but they also pay off,” the chancellor said after the meeting at an 18th-century manor outside the capital.

Schroeder hopes to bolster an economy that has suffered weak growth for three years, raising unemployment above 10 percent.

The chancellor’s new proposal would advance by a year $20.5 billion of a previously approved tax cut for 2001-2005. An additional $8 billion has already been approved for Jan. 1.

“This government is improving the framework for more growth in Germany,” he said. “I think and I hope that this weekend sends a signal of revival to the people of this country.”

He said selling state assets and reducing subsidies would offset some of the shortfall in revenues. But he gave few details and left open how much new debt his center-left government would assume.

That prompted renewed threats from opposition leaders to block the new measure in the upper house of parliament, where Schroeder lacks a majority.

“Of course we want tax relief, but not on credit and not with new tax hikes,” said Edmund Stoiber, the conservative governor of Bavaria edged out in national elections last September. “I’m astonished the government has presented such a vague formula.”

Schroeder has already announced cuts in jobless benefits and health care programs jointly financed by firms and workers, a move supposed to leave companies with more funds for investment.

His center-left government is also cutting the red-tape that makes it hard for firms to fire staff. Industry says the restrictions makes them reluctant to hire new workers.

To shore up its finances, Schroeder said the government wanted to cut subsidies and tax breaks worth $51.4 billion by 2010, and invited Germany’s 16 states to discuss how that figure can be increased to offset the tax cuts.

Finance Minister Hans Eichel said sales of government assets such as shares in former state monopolies Deutsche Telekom and Deutsche Post would take place “to the degree that it can be accommodated on the market.”

Eichel said the government’s still planned to bring the budget deficit down to 3 percent next year of gross domestic product – the limit set by the European Union to guard against inflation and protect the value of the euro.

“Germany and Europe are depending on us to return to growth,” he said. “If the biggest economy limps on, that’s a difficult situation for everyone.”

The tax cuts, which also benefit small businesses, would reduce the top rate of income tax from 48.5 to 42 percent and the bottom rate from 19.9 percent to 15 percent.

Countering criticism from within his Social Democratic Party that his economic reforms are too hard on poorer Germans, Schroeder said the tax plan would see a married worker earning $34,000 pay 27 percent less tax. Someone earning $170,000 would pay 11 percent less, he said.