Deficit slashed

Germany cut its public deficit to one percent of Gross Domestic Product (GDP) in 2011. Final data from the Federal Statistics Office showed that Europe's biggest economy did better than many analysts had expected.

In 2010, the deficit was 4.3 percent. Technically, eurozone countries are not permitted to run up deficits in excess of three percent of GDP. However, the last time German debt was below that ceiling was in 2008 when it stood at just 0.1 percent.

Last year, the gap between revenue and expenditures amounted to 25.3 billion euros ($33.8 billion). Germany's total GDP was 2.57 trillion euros in 2011.

The lower deficit rate was logged despite a raging eurozone debt crisis and a drop in exports to the euro area.

"Heavy investment in the construction industry last year was an important factor in keeping the deficit at bay," Berenberg Bank economist Christian Schulz told Reuters news agency.

Shift in exports

"The drop in overall exports was also weaker than expected, because the decline in supplies to the eurozone was compensated to a large extent by stronger demand in non-EU countries," Schulz added.

Germany was able to slash its deficit despite a fourth-quarter 0.2-percent contraction of the economy – the first sign of stagnation since the 2009 recession, which was caused by the global financial crisis.

But for the full year, Germany's economy expanded by three percent due to improving business conditions.

The outlook for this year remains cautiously optimistic. "Private consumption will most likely be the pivotal growth driver in 2012," said Arnd Schäfer, an analyst with WestLB. "And German exports should also rise again," Schäfer maintained.

hg/gb  (AFP, dpa, Reuters)