The German government has been criticised over its social welfare plans by the country’s panel of economic advisers, traditionally known as the “wise men.”
Chancellor Angela Merkel has scrapped a health surcharge and wants to introduce more child benefits as next years election looms.
The body is also at odds with government growth forecasts.
Angela Merkel’s cabinet is working on a growth plan of one per cent for the rest of this year and 2013.
Yet the “wise men” have undercut growth estimates by two percentage points to 0.8 per cent for the same period.
To date Europe’s largest economy has remained resilient to the crisis in the euro zone, but there are signs that it is beginning to feel the heat as demand for German products fall and company’s hold off any fresh investments.