DIW Raises Germany's Budget Deficit Forecast

Germany's DIW economic research institute raised its forecast for the country's 2004 budget deficit by 0.2 percentage points Wednesday to 3.9 percent of gross domestic product, higher than the government forecast released on Tuesday. The Berlin-based DIW expects the deficit in 2005 to be 3.3 percent of GDP, breaking the European Union's 3 percent limit for a fourth year, the institute said in a statement e-mailed to news organizations. The DIW's previous forecast, from July, was for a 3.2 percent deficit next year. German Finance Minister Hans Eichel announced on Tuesday that he had raised the deficit forecast for this year to 3.7 percent, saying lower-than- expected tax income, increased spending on unemployment and a drop in the Bundesbank's profit had pushed up the shortfall. Eichel said the government still plans to bring the deficit below 3 percent in 2005.