Berlin: Germany will grow much faster in 2011 than previously expected, the government said yesterday, as Europe's top economy continues to motor ahead despite the Eurozone debt crisis raging around it.

The economy is set to expand by 2.3 per cent this year, the latest official forecast said, a sharp hike from the 1.8 per cent estimated in October as Europe's powerhouse makes an impressive bounce back from a deep recession.

"The upswing is on firm ground and is now self-sustaining," Economy Minister Rainer Bruederle said as he presented the report in Berlin.

Bruederle said output in 2012 would likely grow 1.8 per cent, giving the government's first forecast for next year.

As the economy powers ahead, so Germany's unemployment rate is slated to fall further in what has been dubbed a "jobs miracle." Berlin expects an average jobless rate in 2011 of seven per cent, after 7.7 per cent in 2010.

Positive growth

The positive growth figures are also set to help Germany return to below the European Union's three-per cent limit on public deficits. The 2011 deficit should be 2.5 per cent of gross domestic product, the minister forecast, after 3.5 per cent in 2010.

"Germany is therefore on its consolidation course," the report said.

As the world's second largest exporter after China, Germany's recovery was initially driven mainly by increased demand for its goods abroad as the global financial turmoil eased.

But recently, the upswing has been increasingly sustained by domestic demand as low unemployment and a buoyant economic mood have encouraged consumers to prise open their wallets and firms to make investments.

Brutal downturn

In 2009, as demand for goods "made in Germany" collapsed, the country suffered a brutal downturn, with the economy contracting by 4.7 per cent — the worst recession in more than six decades.

But this was followed by what one analyst has termed a "mind-boggling" recovery in 2010, as Germany registered its best performance since reunification in 1990, growing by 3.6 per cent.

And while the 2.3 per cent forecast for 2011 represents a significant decline from last year's heady result, it means that Germany has recovered the ground lost during the financial crisis.

Corporate Germany has also bounced back strongly from the recession, with the DAX index of leading shares at its highest level since May 2008, before the global financial crisis broke.

Post-recovery growth in Germany in 2010

Berlin: German Chancellor Angela Merkel yesterday ruled out a return to the deutschmark amid a debt crisis that has led to calls in some quarters for Europe's top economy to ditch the euro.

"There will be no return to the D-Mark," Merkel said in an interview with Stern magazine due to appear yesterday.

She reiterated that Germany was committed to the European currency and "would do everything necessary to guarantee a stable euro".

Merkel also dismissed the notion of a split in the Eurozone between fiscally prudent northern countries, such as her own, and the debt-stricken south, where Portugal is seen as most at risk after debt bailouts for Greece and Ireland.

"Not with me. For Germany, this is a definite ‘No'. And relations in Europe are not that black and white in any case," she said.

Biggest contributor

As the richest country in Europe, Germany is the biggest contributor to a multi-billion-dollar fund designed to help ailing Eurozone nations while polls have shown that rescuing Greece and then Ireland was unpopular.

Merkel also called for "more intensive cooperation" between the 17 countries that share the euro but insisted that this should not be limited only to Eurozone members.