Nov. 4 (Bloomberg) -- The German government lowered its forecast for tax revenue as unemployment rises and higher oil prices damp consumer spending, adding to pressure on it to find ways of avoiding a fourth breach of European Union deficit rules.

Chancellor Gerhard Schroeder's government expects tax receipts for this year to fall 1.4 billion euros ($1.8 billion) short of previous estimates, the Finance Ministry said in a statement faxed to news organizations after a meeting of a panel of tax experts. Next year's revenue will be 3.4 billion euros lower than estimated in May this year.

The European Commission last week forecast Germany will post a deficit of 3.4 percent of gross domestic product in 2005 after a 3.9 percent overrun this year. Finance Minister Hans Eichel, 62, said Oct. 25 he will take ``additional steps'' to rein in the shortfall if the tax forecasts expose new gaps in the budget. Eichel is scheduled to give a news conference at 2 p.m. in Berlin.

``Germany's runaway deficit needs a thorough, structural cure, not a quick fix,'' said Eva Vorbauer, who helps manage the equivalent of about $12 billion at HSBC Trinkaus Capital Management in Dusseldorf, in a telephone interview.

A three-year slump in Europe's largest economy has swelled welfare costs and pushed the deficit above the EU's limit of 3 percent of GDP every year since 2002. While a surge in exports has led to a recovery this year, tax income and the labor market have yet to pick up.

Jobless Rise

Unemployment rose for a ninth straight month in October, keeping the jobless rate at a five-year high of 10.7 percent, the Federal Labor Agency said yesterday. The cumulative seasonally adjusted increase over those nine months is 189,000 jobseekers.

KarstadtQuelle AG, the country's largest department store operator, and General Motors Corp.'s Adam Opel AG unit last month announced the elimination of as many as 15,500 jobs in Germany.

A rise in unemployment of 100,000 creates costs of 1.8 billion euros for government coffers. Rising joblessness is damping consumer spending, already strained by a 50 percent increase in oil prices this year.

The German government last week scaled back its economic outlook for 2005, citing the impact of higher oil prices on exports and the lack of growth in consumer spending.

Declining employment, as measured by the number of people on payrolls contributing to social security, is denting government receipts from income tax, Eichel said on Sept. 11, noting that value-added tax doesn't benefit from export-led growth while levies on gasoline and tobacco are also decreasing.

Federal Shortfall

The government-led tax panel, which adjusts its revenue forecasts to economic realities twice a year, forecast the federal government's 2005 tax shortfall will be 3.5 billion euros more than in targets drawn up on May 13, putting total tax revenue at 190.7 billion euros, an increase of 2.2 percent from 2004. Revenue for Germany's 16 states will fall 1 billion euros while municipalities will collect 800 million euros more in taxes next year.

``The federal government is maintaining its target of adhering to the 3 percent level of the European stability and growth pact next year,'' the Finance Ministry said. ``We will outline as part of our stability program at the start of December how we intend to meet the requirements'' of the pact in the coming years.

Eichel, who expects this year's government deficit to reach a postwar record of 43.7 billion euros, has already considered the possibility of raising immediate cash payments from Deutsche Telekom AG and Deutsche Post AG in return for taking on their long- term pension liabilities to civil servants employed by the former state monopolies, ministry spokesman Joerg Mueller said last week.

French Example

Electricite de France and Gaz de France, the state-owned power and gas utilities, will make one-time payments totaling at least 7 billion euros to the French government to transfer part of their pension liabilities to the state. If Eichel were to copy the French precedent, he would not need approval for it from the opposition-ruled upper house of parliament.

Other deficit-cutting steps, such as eliminating tax breaks or withdrawing next year's planned cuts in income taxes worth 6.7 billion euros would require the approval of the upper chamber, making them more difficult to implement.

Eichel has said he wants to finalize his proposals for cutting spending by Nov. 11, when parliament's all-party budget committee completes the scrutiny of his draft budget for 2005, which aims to use record asset sales worth 15.4 billion euros to limit new borrowing to 22 billion euros.

To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net.

Last Updated: November 4, 2004 06:15 EST