BERLIN, Jan 8: Germany will have to take “necessary and probably painful measures in a number of areas” to assure that its public deficit is reduced, the finance ministry said Wednesday.

The comment came in reaction to a European Commission statement calling for Germany to take action by May 21 to cut its ballooning public deficit, to meet the strict budget rules underpinning the euro single currency.

“We are openly happy about the decision taken by Brussels,” a spokesman for the ministry said, suggesting that the government saw the demand as a justification for the reforms it is trying to put in place.

The ministry reaffirmed in a statement that it aimed to balance its budget by 2006 and that great efforts were being made to revive the economy.

“To stimulate German growth, widespread reforms must be made to the labour market and social security system. The first steps were taken when the Hartz recommendations were put in place, and others will follow this year,” it said.

The Hartz Commission was set up by Chancellor Gerhard Schroeder last year to slash high unemployment, currently at around 10 per cent.

“With the decisions aimed at putting in place the Hartz recommendations and the measures taken in the health sector, we have started to prepare Germany for the future,” the ministry said.

The German government is still officially predicting growth of 1.5 per cent this year, but is widely expected to cut that forecast at the end of January.

One of Germany’s leading economic research institutes, DIW, said on Tuesday it expects the economy to grow by a meagre 0.6 per cent this year, only marginally faster than the 0.2 percent pencilled in for 2002.

The European Commission’s warning was the second step of a formal “excessive deficit procedure” against Berlin.

The commission called on EU finance ministers to adopt its recommendations to Germany when they meet in Brussels on January 21.—AFP