ERFURT, Jan 10: German Chancellor Angela Merkel refused on Saturday to rule out Germany breaching the EU’s budget deficit limit of three per cent of gross domestic product (GDP) this year.

“It’s clear that we want to respect the Maastricht criteria (on national debt),” she said at a meeting of her conservative Christian Democrats (CDU) in the central city of Erfurt. “But it would be wrong to make an absolute statement.”

Merkel said it was unclear how Europe’s biggest economy, mired in recession since last year, would develop.

“I can’t give you any binding answers,” she said after the CDU agreed on a 10-point plan aimed at shoring up the economy.Germany exceeded the EU’s deficit cap for four years in 2002-2005, embroiling it in a row with the European Commission over whether it should face sanctions. In the end, it did not.

Merkel noted a number of European Union countries had breached the EU’s deficit rules.

Leaders in the ruling coalition of conservatives and Social Democrats (SPD) are due on Monday to agree a new stimulus plan to boost Germany’s economy. The package is expected to cost up to 50 billion euros ($68.38 billion) over the next two years.

Many analysts believe the German economy will contract by a record margin this year, with some saying GDP could shrink by four per cent or more. The economy has never contracted by as much as one percent over a full year since World War Two.

German weekly Der Spiegel said SPD Finance Minister Peer Steinbrueck planned a supplementary budget this month to raise an extra 20 billion euros for the stimulus package.

A spokesman for the Finance Ministry said on Saturday the government aimed to finalise the funding for the plans by the end of this month, but that no figures had been fixed yet.

Merkel’s conservatives and the SPD have traditionally been bitter rivals, and the need to balance Germany’s budget was one of the few policy areas where there had been strong agreement.

A senior CDU finance expert told Reuters the conservatives had calculated Germany’s total public sector deficit would reach 3.5 per cent of GDP this year and a record 4.5 per cent next year.

Germany’s public finances -- comprising budgets at federal, state and local government level, as well as social security systems -- ran to a slight surplus last year.—Reuters