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German budget surplus bigger than expected

Thanks to low unemployment and higher tax revenues, Germany as a whole collected more than it spent last year. However, the slight national surplus was narrowed by a shrinking economy in 2012's fourth quarter.

Overall, German government institutions were able to generate a small combined budget surplus of 0.2 percent in 2012, the German Federal Statistics Office (Destatis) said on Friday.

Destatis data showed that federal, regional state and communal authorities collectively ended up with a 4.2 billion euros ($5.5 billion) surplus - a significant improvement in the national budget figure, which in 2011 recorded a shortfall of 0.8 percent.

The first surplus since 2007 was higher than calculated in a preliminary estimate which had forecast a plus of 0.1 percent. In addition, it beat forecasts by economists who didn't expect a surplus at all.

The surplus was achieved mainly as a result of higher revenues.

Social security institutions, including health funds, pensions, and the unemployment insurance scheme, also ran up surpluses of 17 billion euros in 2012. Income from premiums was the highest in more than 20 years on the back of rising wages and low unemployment, Destatis said.

In addition, German municipalities achieved a joint surplus of 6.1 billion euros in their 2012 budgets.

Federal, state governments posted deficits

The overall budget surplus came despite the fact that the federal government and the governments of Germany's 16 regional states ran up their own budget deficits of 12.2 billion euros and 11.3 billion euros respectively last year.

The surplus came despite sluggish growth of just 0.7 percent in 2012, which even turned into a contraction of minus 0.6 percent in the final quarter of the year. Economists predict a major upswing in the German economy this year with the national budget remaining in positive territory, or at least well below the EU's deficit target of three percent of Gross Domestic Product (GDP).

uhe, ipj/pfd (dpa, Reuters)