German Chancellor Angela Merkel's new administration may give an indication of their plans to attract private capital to the local film industry before the Christmasbreak.

The issue has been top of the local film agenda after the scrapping of media funds last week and all eyes are now on the new government's ideas for a replacement.

Speakingat the European Producers Club conference, Berlin media lawyer Stefan Luetje said: "afirst meeting of the relevant people in charge is being held next week, somaybe before Christmas there will be a decent indication of which way we aregoing.

"I think the key difficulty is that tax-driven incentives are somewhat'scorched earth', so to speak. That will be the main challenge in the comingweeks to see whether we can convince the Ministry of Finance that what we wantto achieve is to get an exemption from the rule that was implemented lastweek."

In theCoalition Agreement agreed last month, the CDU, CSU and SPD parties in thegreat coalition indicated that they "want to improve the generalparameters for the German film industry in order to secure its internationalcompetitiveness" and set a deadline of July 1, 2006 "at thelatest" "in order to mobilise private capital for film productions inGermany."

As MartinMoszkowicz, Constantin Film's board member responsible for production, pointedout, "the flavour of the month seems to be that everybody says 'Let's tryto subsidise a spend in the country and help local industries'. That's whatwe're hoping will be something that we'll get in Germany. The old governmentwas opposed to any overall tax incentives. They basicallly said: 'It's acomplicated system, the lawyers and the middlemen make lots of money. Let's gofor a direct subsidy'. That's how we got the risk capital fund. That wasn't aninitiative of the industry, it was the only thing that was available. So, forevery euro you spend in Germany, you would get 20 Cents back. It was a verysimple system where there was no application process or committee."

"The newgovernment is trying to find ways of bringing private capital into theprocess," Moskowicz added, "that means that one has incentivise theprivate sector and so you have to give them some kind of tax incentives. Thebig question is whether the Finance Ministry will go for that."

"Weare not asking for a gift," he stressed. "With additional funding,one could shoot films in Germany which would (a) help the local economy and (b)you might be able to make different movies, ones with higher budgets which youcould only otherwise do in the English language and would then be able toproduce for the local market." .

Togetherwith Luetje, Moskowicz was one of the members of the film industry workinggroup that worked earlier this year with the Federal Chancellery office on thecreation of a Euros 90m risk capital fund in lieu of the media funds. Germanfilm industry lobby groups were meeting in Berlin this weekend to hammer out aunified industry response for future discussions.