Germany's leading economists have reduced their growth forecast for this year and predicted that Germany will continue to breach euro-zone guidelines this year and next.

The so-called "six wise men", who advise the government on economic policy, said stalled consumer confidence and high unemployment called for a reduction in their growth forecast to 1.5 per cent from their October forecast of 1.7 per cent. However, they said there was still hope for Europe's largest economy.

"The German economy is slowly hauling itself out of stagnation," said the economists in their twice-yearly report. "But growth is too weak to generate job creation and ease Germany's budget problems. Private consumption continues to fail to drive growth as people remain worried about their income prospects."

The economy has seen negligible growth in the last three years, hobbled by an unemployment rate of 10 per cent plus and a lack of clarity on the government's reform agenda to address structural problems in the economy. The economists said employment market reforms already implemented may have had less of an effect than originally hoped.

The report is a disappointing read for Germany's hard-pressed finance minister, Mr Hans Eichel, dampening his hopes that Germany's deficit will fall below the euro-zone ceiling of 3 per cent of gross domestic product.

The economic experts said the budget deficit would be 3.7 per cent of GDP this year and 3.5 per cent next year, assuming euro-zone interest rates remain at their historic low.

"The state of public finances in Germany continues to be strained, the budget deficit high," the institutes said in their report.

The government will study yesterday's report before issuing its own economic forecasts.