* Govt econ advisers: German economy to grow 0.8 pct in
* Advisors criticise govt plans for more social welfare
* Say ECB bond-buying must be "emergency solution" only
By Sarah Marsh
BERLIN, Nov 7 Germany must do more to
consolidate its budget given a darkening outlook, the country's
panel of economic advisers said on Thursday.
The group, traditionally known as the "wise men", criticised
the social welfare plans Chancellor Angela Merkel's cabinet
agreed ahead of next year's federal elections.
The panel, which advises the government on economic policy,
forecast growth for Europe's largest economy of just 0.8 percent
this year and next, undercutting the government's forecast for
expansion of 1.0 percent in 2013.
"The low-point of economic momentum in Germany will probably
be reached in the fourth quarter," the advisers wrote in a
nearly 400 page annual report. "We expect the German economy to
pick up some steam again during 2013."
Germany's economy has remained resilient to the euro zone
three-year old crisis and is even aiming to balance its budget
in 2014 on higher tax revenues and lower interest it pays to
service its debt deemed a safe-haven.
But it is now succumbing, as European demand for German
products drops and uncertain firms put off investments, and
many economists forecast a contraction for the fourth quarter.
Data this week showed Germany's private sector shrinking for
a sixth straight month and industrial orders falling at their
sharpest rate in a year.
Germany may have managed to consolidate its budget well this
year but it cannot rely on strong tax revenue and "special
factors" such as low interest on debt, the advisers warned.
Moreover it will likely have to contend with rising spending in
the future due to an ageing population.
"More ambition is necessary in consolidating the budget,"
they said. "Structural expenditure, such as childcare benefits,
supplementary pensions or the scrapping of charges to visit
doctors, go in the wrong direction."
Merkel's centre-right coalition reached agreement on Monday
to scrap an unpopular health surcharge and to introduce extra
child benefits, hoping this will bolster support in the
countdown to elections, probably in September 2013.
The opposition denounced the deal as "horse-trading" between
fractious coalition partners and said "taxpayers will be
financing this election gift".
The advisers also warned that the European Central Bank's
bond-buying programme must not become a permanent stabilisation
mechanism, but must remain an emergency solution.
"The boundary between monetary and fiscal policy was blurred
in a questionable way," the panel said, referring to the ECB's
plan to buy up the bonds of struggling euro zone states.
"Given that this can only be an emergency solution, we still
need a fiscal solution, as this panel has developed with the
debt redemption pact."
The advisers last year called for the government to consider
a European debt redemption pact, involving countries with
sovereign debt above 60 percent of GDP pooling their excess debt
into a redemption fund with common liability.
They would commit to reforms and see their debts repaid over