GERMANS Finance Minister Mr Theo Waigel, putting his 1997 budget to parliament yesterday, said there was no alternative to fiscal austerity to boost growth and allow Germany to qualify for European monetary union.

Opposition Social Democrats (SPD) and trade unionists hit out at Mr Waigel after an embarrassing overshoot in this year's deficit. But he countered that he was determined to slash borrowing in 1997, when eligibility for joining EMU will be judged.

He said the government would stick to total spending of 440 billion deutschmarks (£181 billion) next year a fall of DMI 1 billion from this year and a deficit of DM56.5 billion.

"We will stick to the 1997 budget figures and we will implement our austerity package," he said. But he warned that high unemployment posed a risk and that further cuts at the Federal Labour Office in charge of unemployment benefits may be needed.

Next year's planned total public deficit, at 2.5 per cent of gross domestic product, is well within the Maastricht treaty's 3 per cent borrowing limit. But it will he hard to achieve after the 1996 deficit hits an expected 4 per cent.

SPD finance spokeswoman, Ms Ingrid Matthaeus Maier said the budget was based on over optimistic forecasts for spending and revenues, while Germany's DGB trade union federation criticised it as unrealistic and socially unjust.

Unemployment has surged to post war highs of nearly four mil lion, or around 10 per cent of the workforce.

The DGB, which mobilised 240,000 protesters last weekend against the cuts, said austerity plans would "demand sacrifices from ordinary people while giving tax cuts to companies and the rich".

Mr Waigel said that following strong second quarter growth, the German economy was doing better than earlier expected and the business climate was improving.

Real growth this year would exceed government forecasts and an expansion of 1 per cent was achievable. Forecasts of 2 to 2.5 per cent growth next year now looked solid, he said.

Mr Waigel's budget is one component in an austerity package called the "Programme for More Jobs and Growth" which aims to slash public spending by DM50 billion and social security spending by DM20 billion next year. The budget reading will last all week but a vote is not due until November. Parliament will, however, vote on Friday on other key parts of the austerity package.