Tough Iran sanctions to hit Germany hard: report

German Chancellor Angela Merkel (R) and French President Nicolas Sarkozy address a news conference after a meeting in Berlin November 12, 2007. Germany, Britain, France and the United States called this week for the United Nations to consider more severe sanctions because they say Iran has failed to allay concerns about its atomic work.

BERLIN (Reuters) - The adoption of tougher sanctions against Iran over its nuclear program could cost the German budget 2 billion euros, according to Finance Ministry estimates cited in Der Spiegel magazine on Saturday.

Germany, Britain, France and the United States called this week for the United Nations to consider more severe sanctions because they say Iran has failed to allay concerns about its atomic work.

Chancellor Angela Merkel has also vowed to press German companies to reduce trade with Iran, which the West fears is trying to build nuclear weapons.

Der Spiegel reported that if Iranian Bank Melli, which handles most of Germany's trade with Iran, were placed on a European Union embargo list, it would cost the budget 700-800 million euros ($1-1.2 billion) next year because the government would be forced to pay damages to German firms.

Over the medium term, finance ministry experts believed tougher sanctions could cost Berlin 2 billion euros, according to the magazine.

Finance Ministry spokesman Torsten Albig declined to comment on the details of the report but said the estimates appeared to be based on data from Euler Hermes, which manages export credit guarantees for the German government.

"The logic (of the report) is correct," he said.

Germany is one of Iran's largest trading partners in the EU, although exports have fallen sharply this year amid pressure from the United States for German firms to cut their ties to the Islamic Republic.

Iran says its nuclear program is for peaceful civilian energy purposes.

(Writing by Noah Barkin; editing by Diana Abdallah)