Brussels, Jan. 22 (Bloomberg) -- Germany doesn't face a rebuke for failing to cut its budget deficit, the European Commission said, sparing Chancellor Gerhard Schroeder an election-year embarrassment. Germany, the country that devised the euro public finance rules, is set for a deficit of 2.7 percent of gross domestic product in 2002, the highest in Europe, the commission forecasts. Countries that surpass 3 percent are liable to fines. ``Nobody blames Germany for its economic and fiscal policies,'' Monetary Affairs Commissioner Pedro Solbes said as he arrived for a meeting of EU finance ministers. ``It's quite clear that its data is due to its economic situation and not economic policies.'' The German economy, Europe's biggest, grew 0.6 percent in 2001, the slowest in eight years. Companies including Siemens AG announced more than 130,000 job cuts. Germany sank into recession in the second half of the year, eroding tax revenue and raising the cost of welfare benefits as unemployment rose. Schroeder's challenger, Bavarian leader Edmund Stoiber, called on Sunday for the deficit to widen to the EU limit to spur an economic recovery. An EU rebuke on public finances would damage a government that made deficit-reduction one of its priorities.

`No Criticism'
``There was absolutely no criticism from either the commission or other member states of Germany's budgetary policy,'' German Finance Minister Hans Eichel told journalists after ministers from the 12 euro countries met last night. ``Naturally, Germany's budgetary position is not where it should be and we will have to press on with our consolidation process.'' Schroeder, trailing in opinion polls since the two conservative opposition parties tapped Stoiber on Jan. 11, is counting on an economic rebound to create jobs and boost his chances of winning a second term in September. The jobless ranks rose every month in 2001. Schroeder, who made cutting unemployment the standard for judging his government, was in November forced to take back a pledge to bring unemployment below 3.5 million before the end of 2002. The commission, the EU's executive arm, will publish an assessment of Germany's budget on Jan. 30. A formal caution would be the first reprimand of a large EU country since the introduction of the euro in 1999. Other ministers urged the commission to go easy on Germany as well as on Portugal, which is set for a deficit of 1.6 percent in 2002. ``There was a general consensus that the overall fiscal policies of Germany and Portugal are correct,'' said Spanish Economy Minister Rodrigo Rato, the meeting's chairman.

`Any Initiative'
``For the time being the commission has not adopted any initiative,'' Solbes said. Asked if he plans to send a letter to Germany, Solbes said: ``No, I'm not planning on sending any letters.'' Ireland, the only country reprimanded so far, has the bloc's second-smallest economy. Ireland was criticized last February for using tax cuts to stoke an already booming economy. The criticisms were later withdrawn when Irish inflation abated. ``I am convinced that Germany won't breach the 3 percent deficit margin,'' Luxembourg Prime and Finance Minister Jean- Claude Juncker said. ``I don't see any seriously misguided policy on Germany's part. If I were the commission, I wouldn't give this massive warning.'' Finance ministers will today endorse plans for budget surpluses in the Netherlands, Belgium, Austria, Finland and Luxembourg -- five countries with a combined economy about half the size of Germany's. Germany -- along with France, Italy, Spain, Portugal, Ireland and Greece -- comes up at the next meeting, on Feb. 12.