* German state posts budget surplus of 23.7 bln euros
* Has also been spending to integrate, house refugees
* Government sees consumption-led upswing continuing
* GDP growth quadruples to 0.4 pct in fourth quarter
(Adds picture tag)
By Michael Nienaber
BERLIN, Feb 23 Germany posted a record budget
surplus last year helped by rising tax revenues and employment
and low debt costs, creating conditions for solid economic
growth in 2017 underpinned by higher state and household
The German state has been running a surplus for three years,
with the gap rising to 23.7 billion euros ($25 billion) in 2016,
the highest since the country reunified in 1990, Federal
Statistics Office data showed on Thursday.
That has created a huge fiscal buffer at a time when
authorities are working to house and integrate hundreds of
thousands of immigrants, and separate Statistics Office data
showed higher state spending was a factor in boosting economic
growth to 1.9 percent last year.
Under Germany's budget law, the federal government's surplus
of 7.7 billion euros will go into a fund for refugee-related
The economic growth rate for 2016 was the strongest in half
a decade, and the Finance Ministry said it expected spending by
households and public authorities to drive gross domestic
product growth again this year - consolidating a shift away from
the export activity that traditionally powered Europe's biggest
As well as supporting economic growth, the arrival of more
than a million migrants - most fleeing war and poverty in Africa
and the Middle East - in Germany last year has polarised the
country's political landscape ahead of federal elections due in
Thursday's Statistics Office data, which confirmed
preliminary GDP readings, also pegged fourth quarter growth at
0.4 percent, showing foreign trade as a net negative.
The government expects growth to slow to a still robust 1.4
percent in 2017.
"The German economy is on a solid growth path," the finance
ministry said in its monthly report, also released on Thursday,
adding that indicators signaled a continuation of the economic
upswing in 2017.
"Consumption will probably remain an important driver of
economic growth," the ministry said, pointing to job creation,
pay hikes, low interest rates and moderate, albeit rising energy
The ministry's report supported readings in Wednesday's Ifo
index, which showed German business morale rose in February,
boosting hopes for a robust start to 2017 despite worries about
U.S. trade policies and the outcome of elections in France due
in April and May.
TAX AND SPEND
Germany's economic upturn is also pushing up tax income.
In January, revenues of the federal government and the 16
regional states rose 4.0 percent on the year, the finance
ministry said. That is proportionally above the projected rise
of 2.9 percent for the whole year.
The buoyant tax revenue has enabled Chancellor Angela
Merkel's government to raise state spending on roads, faster
internet and refugees without taking on new debt.
It also means Finance Minister Wolfgang Schaeuble can stick
to his cherished but internationally criticised goal of running
a balanced budget as the government gears up for what promises
to be a tightly contested election.
But a continuation of Germany's consumption-led upswing is
by no means guaranteed.
Suggesting it might weaken, a survey showed on Thursday that
the mood among German consumers worsened more than expected
heading into March to reach its lowest level in four months.
The survey by the Nuremberg-based GfK institute cited rising
inflation and economic risks linked to the policies of U.S.
President Donald Trump as the main factors for the dip.
Its consumer sentiment indicator, based on a survey of
around 2,000 Germans, fell to 10.0 going into March. A Reuters
poll had expected a fall to 10.1 from 10.2 a month earlier.
($1 = 0.9477 euros)
(Reporting by Michael Nienaber, editing by John Stonestreet)