Germany still needs to reform for growth, the OECD warned

The rise was due to Germany's strong export market said OECD economist Eckhard Wurzel.

The Paris-based think tank said Germany was unlikely to meet its fiscal deficit targets in 2004 and 2005.

The OECD also warned Germany must press on quickly with widespread reforms and make "substantial" extra efforts to meet medium-term budget targets.

Mr Wurzel explained that the strong economy had come about as the country recovered from three weak years - and partly due to extra working days this year.

"The consolidation plans of the federal government, as set out in the stability programme for the EU, are unlikely to be met," said the organisation's report.

Reform call

The report went on to say "repeatedly underachieving fiscal targets undermine confidence. Public finances need to be put back on a sustainable path, which requires a balanced budget within a few years and surpluses further ahead."

It added that to regain its standing as a country with a strong, innovative economy, Germany needed reform to boost efficiency, growth and employment and must also move public finances out of deficit and into the black.

Germany's current public is expected to reach 3.7% of output this year - dipping to 3.1% in 2005, slightly above the eurozone limit of 3%, the report said.

Government revenues are expected to fall short of expectations in both 2004 and 2005.