Shops selling non-essential goods, hair-salons and schools in Germany will close from Wednesday, Chancellor Angela Merkel said, to halt an "exponential growth" in new coronavirus infections in Europe's biggest economy.

The partial lockdown will apply until January 10, with companies also urged to allow employees to work from home or offer extended company holidays, under the new measures agreed by Merkel with regional leaders of Germany's 16 states on Sunday.

Alcohol sales would be banned in public places, essentially outlawing the business of mulled wine stands, which have proved popular in the days running up to Christmas.

"The corona situation is out of control," said Bavarian state premier Markus Soeder, welcoming the tougher restrictions which he pledged to implement in his state.

Germany in November closed leisure and cultural facilities and banned indoor dining in restaurants. 

The measures had helped to halt the rapid growth of infections after the autumn school holidays, but numbers had plateaued at a high rate.

Over the last week, however, the country's disease control agency reported that the infections trend has taken a worrying turn.

"With increasing mobility and the therefore linked additional contacts in the pre-Christmas period, Germany is now in exponential growth of infections numbers," said the policy paper agreed by regional leaders and Merkel.

It was, therefore "our task to prevent an overload of our health systems and that's why there is an urgent need to take action," said the chancellor.