The government favors a "centralized, long-term and therefore lasting" approach to tackling pollution, said a spokesperson in comments that came after the southern German cities of Munich and Stuttgart said they had breached EU pollution limits.

With other cities soon expected to follow suit, environmental groups have called for street closures, reduced speed limits and even a ban on driving on Sundays — all over the objections of businesses that fear lost sales if drivers are forced stay at home.

"Clean air in cities and livable communities are more important," said Gerhard Timm, who heads the environmental lobby BUND. "If necessary, road traffic has to take a secondary place to this."

Yet under a government plan, partial traffic bans would take a back seat to tax breaks for the installation of diesel engine particle filters.

The popularity of cars that run on diesel fuel has risen dramatically as the price of regular gas has surged. They now account for 40% of all new registrations in Germany but have been criticized for spewing dangerous amounts of fine dust particles into the air.

While a special filter system can cut diesel emissions by about 60%, many drivers have balked at paying upwards of 650 Eur ($800) to install the technology, which is typically produced by French manufacturers.

Now, the government plans to propose a car tax credit of up to 350 Eur ($450) for drivers who buy the filters, which will become mandatory on new cars in 2008.

"The government assumes that the states, which are responsible for the car tax, will react positively to the proposal," said an official statement. "The government will present a corresponding draft law before the summer."

EU health laws provide for sanctions if cities have more than 50 micrograms of fine particle dust per square meter of air for more than 35 days a year.

The limit was exceeded for the 36th time in Munich on Monday, leading a local resident to file a legal complaint seeking to force authorities to take steps such as limiting the use of diesel vehicles