Schröder agrees huge deficit breaks EU limit

Gerhard Schröder's Social Democrat-led government conceded that Germany would fail to keep within the European Union's budget deficit criteria for the second year running yesterday after declaring a record €43.4bn (£30bn) debt for 2003.

The grim economic predicament was spelt out by Hans Eichel, the Finance Minister, who admitted for the first time Germany would overstep the EU's 3 per cent deficit limit - by more than 1 percentage point - in 2004 and also faced the prospect of failing to meet the criteria in 2005.

"We would like to keep within the deficit limit in 2005 but that will be difficult to achieve," Mr Eichel said after disclosing that Germany's debt mountain had soared to more than double the €18.9bn that was originally estimated.