September 11, 2012 / 1:57 PM / 8 years ago

UPDATE 1-German finmin upbeat on economy in budget debate

* Schaeuble opens parliamentary debate on 2013 budget

* Sees little downside risk to govt growth f’casts

* Says German reforms are example to other states

* Says ECB printing presses will not solve crisis (Adds details, quotes)

BERLIN, Sept 11 (Reuters) - Germany’s economy is cooling but fears of a sharp slowdown are overblown and there are few downside risks to the government’s forecast for 0.7 percent growth this year, Finance Minister Wolfgang Schaeuble told lawmakers on Tuesday.

Opening a parliamentary debate on the draft 2013 budget with a bullish speech, Schaeuble said Europe’s largest economy had become more resilient to shocks such as the global slowdown thanks to structural reforms and policies.

Germany, seen as the sick man of Europe 10 years ago, now has the lowest jobless rate since reunification in 1991 and the highest employment levels in its history, Schaeuble said.

“That we are better positioned is not only obvious in (these labour market developments), but something more fundamental has changed and that gives us all confidence, also for future developments,” he told the Bundestag lower house of parliament.

The economy, which has been one of the few brighter lights for a euro zone sinking into recession, is weakening slightly after its swift recovery from the 2008/09 recession.

But the government’s forecasts for 2012 growth and 1.6 percent expansion in 2013 were “cautious from the very start”, Schaeuble said. As a result, there were few downside risks to these estimates, particularly for this year, he added.

The minister said the OECD’s recent forecast for a recession was “pessimistic”. But even if that scenario occurred, unemployment would not jump significantly.

Joachim Poss, a senior member of the opposition centre-left Social Democrats (SPD), said the government was “whitewashing the situation” in view of federal elections next year, and their positive assessment overlooked the risk of a downturn.

Recent sentiment surveys have suggested the outlook for Germany is darkening, but data last week was unexpectedly upbeat, showing industrial output, orders and exports up.

The economy ministry said earlier on Tuesday in its monthly report that the economy would be stable over the second half of 2012 and also dismissed forecasts for a recession.

GERMAN SETS “EXAMPLE”

Low unemployment has seen tax revenues jump and the government is targeting a balanced budget in 2016 for the first time in more than 40 years. It predicts annual growth of around 1.5 percent between 2014 and 2016.

The budget also sees net new borrowing falling to 18.8 billion euros in 2013 from 32.1 billion this year. Schaeuble said a new supplementary budget to include Germany’s 1.6 billion euro contribution to the capital increase of the European Investment Bank would not change the 2012 figure.

Germany’s success in achieving solid growth and budget consolidation via painful reforms make it “an example for many other European states”, Schaeuble said.

“We offer a reasonable, better alternative at a European level to the many wishes for a mutualisation of debt, a debt union or euro bonds,” he said, in an attack on the centre-left SPD opposition and other European states.

However, former Social Democrat Chancellor Gerhard Schroeder has recently tried to remind Germans that much of the credit for the low unemployment lies with his labour market and welfare reforms implemented before Angela Merkel replaced him in 2005.

Schaeuble, from Merkel’s centre-right Christian Democrats, reiterated that the onus in the euro zone crisis was for vulnerable states to correct the mistakes of the past, rather than pooling debt or “casually” turning to the central bank’s printing presses.

The plans for potentially unlimited purchases of bonds issued by countries that request a European bailout and fulfil strict domestic policy conditions have stirred anxiety in Germany over the growing costs of the nearly three-year-old debt crisis.

The Bundestag will continue to debate the budget this week and is scheduled to vote on the final budget on Nov. 23. (Additional reporting by Alexandra Hudson and Michelle Martin, Writing by Sarah Marsh, Editing by Patrick Graham)

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