GERMANY has raised its unemployment forecast for 1997, an increase that tears a hole in the government's budget and hurts the country's chances of qualifying for the single European currency.

A spokesman for the Finance Ministry said the government had lifted its forecast for average unemployment this year by about 120,000 from an earlier prediction of 4.1 million. He said the government had made a number of other revisions, which he declined to detail. But he said Germany was sticking with its estimate that gross domestic product (GDP) would rise by 2.5 per cent.

"We have raised the unemployment forecast for the full year because of the current job market conditions," the spokesman said. But he declined to comment on reports that first quarter tax revenues would be far below expectations.

The government is to receive a report later this week detailing, these revenues. The eagerly awaited report, due on Thursday, will be put together by the government, its council of economic advisers, independent economic research institutes, municipalities, and the Bundesbank.