Robust growth and record low unemployment enabled Germany to slash its public deficit last year, even if Europe’s biggest economy ground to a halt at the final months, according to newly-released data.

Germany – which given its economic clout has assumed a leading role in the fight to end Europe’s chronic debt crisis – ran up a deficit equivalent to just one per cent of output last year, down from 4.3 per cent in 2010.

It is the first time in three years that the German deficit ratio has been below the three per cent ceiling imposed by the EU and puts Berlin in a powerful position in the efforts to find a solution to a crisis that is threatening to break up the single currency and push the entire world into recession.

Europe’s current financial woes stem from long years of overspending by governments and growing doubts on the financial markets that countries will ever be able to pay back their vast mountains of debt.

Germany itself has fallen foul of the very rules that it was so keen to impose on profligate southern European neighbours in the early years of currency union and its deficit has spiralled upwards in recent years.

But it is now reaping the benefits of the deep and painful economic restructuring undertaken in the past and the overall state deficit – which covers budgets for central government and regional governments, social services and the local authorities – is coming down.

In concrete terms, the deficit – the gap between income and spending – amounted to €25.3 billion in 2011, compared with €105.9 billion in 2010, the national statistics office Destatis calculated.

While the federal government and the regional governments of Germany’s 16 states still spent more than they received in revenues last year, the municipal authorities ended the year with a modest budget surplus.

And the social welfare system achieved its biggest budget surplus since unification in 1991 thanks to the favourable situation on the labour markets, according to Destatis.