WEAK tax revenues during the first quarter may force Germany to revise upwards its forecast for revenue shortfalls this year, government sources said yesterday.

But the sources played down horror scenarios painted by the opposition Social Democrats (SPD), who have said that sluggish tax income and extra costs arising from high unemployment would blow away Bonn's bid to join Europe's single currency.

Tax revenues are being closely watched since they form one half of the equation in Bonn's bid this year to meet borrowing targets set by the Maastricht Treaty and lead European monetary union (EMU) from the outset in 1999. The most important target, and the one many countries are having the most difficulty meeting, is the restriction of budget deficits to

3 per cent of GDP.

The sources said that total tax revenues during the first quarter of this year fell by 4.3 per cent, compared to a year earlier, to DM170.8 billion (£63.95 billion).

The Finance Minister, Mr Theo Waigel, in a speech he was due to give in New York last night, said he was optimistic of achieving the Maastricht Treaty budget target.