Germany has lowered its forecast for this year's budget deficit to 4.5 percent of gross domestic product. It says it now expects the shortfall to drop to 3 percent — the maximum allowed under European Union rules — in 2012.

Germany, which has Europe's biggest economy, had forecast in January that the deficit would rise to 5.5 percent this year in the aftermath of the economic crisis.

However, moderate unemployment that has kept down spending on benefits and a higher tax take have allowed it to reduce its plans for new borrowing.

Germany has pledged repeatedly to get the deficit back under 3 percent of GDP by 2013.

The Finance Ministry said Thursday it now expects to hit 3 percent in 2012 and 2 percent in 2013.