Germany's chronic skills shortage is costing its economy up to €20 billion a year, or one percentage point of gross domestic product, according to an economics ministry report.

The failure of Germany's education system to foster skills required by its fast-growing export industry could inflict "long-term damage" to Europe's largest economy, Michael Glos, economics minister, said yesterday.

The publication, the first attempt at putting a price on Germany's skills bottleneck, comes as Angela Merkel's cabinet is preparing to meet on Thursday for its two-day mid-term conclave.

Officials said the "grand coalition" of Christian and Social Democrats had agreed on a "national qualification offensive" aimed at addressing the skills problem.