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Post-war Germany suffered its worst ever recession last year when Europe's biggest economy contracted by five percent in the global slump, official figures showed on Wednesday.
Amid the gloom, however, employment held up much better-than-expected and the public deficit was much less than feared despite additional government spending to soften the blow from the sharpest global downturn since the 1930s.
Overall economic activity shrank for the first time in six years as exports fell 14.7 percent and business investment plunged by 20 percent, the Destatis national data service said in a statement.
This was the worst figure since the Great Depression when German output contracted by more than seven percent in 1931-32, it added.
UniCredit economist Andreas Rees summed up 2009 as "the annus horribilis for the German economy."
Destatis president Roderich Egeler told journalists in Wiesbaden, western Germany, that "the economic slump occured essentially during the winter period of late 2008 and early 2009."
Economic activity expanded 1.3 percent in 2008, Destatis said, and the government has estimated -- some say conservatively -- that it should grow again by 1.2 percent this year.
Berlin posted a better-than-expected public or budget deficit of 77.2 billion euros (112 billion dollars) meanwhile, around 3.2 percent of total output, after balancing its accounts in 2008, the data showed.
That was the second best eurozone deficit behind Luxembourg, Commerzbank chief economist Joerg Kraemer noted.
The European Union holds member states to public deficits of no more than 3.0 percent of gross domestic product (GDP) and it was the first time in four years that Berlin exceeded the limit, Destatis said.
Germany releases fourth-quarter and final 2009 GDP figures on February 12.
This year, the finance ministry expects the deficit to exceed 5.0 percent as the government spurs the economy with more stimulus measures in an effort to get it back on track.
Government spending jumped 2.7 percent in 2009, while household consumption gained a slight 0.4 percent, in part owing to a car scrapping premium that boosted auto sales.
German authorities have approved a stimulus package worth up to 21 billion euros in 2010, including 18 billion euros in tax relief for families.
The country's export-oriented economy was slammed by the global slowdown but should benefit from fresh emerging market demand for capital goods such as machine tools and motor vehicles needed for their own output.
Imports also fell last year and the global collapse in trade cut 3.4 percentage points from German GDP overall.
The economy ministry was upbeat Wednesday despite the historic slump, saying the worst was over.
"It is particularly welcome that the labour market has remained surprisingly resistent," Economy Minister Rainer Bruederle said in a statement.
Unemployment has been limited by Germany's short-time schemes under which the state subsidises shorter hours for workers to avoid widespread layoffs.
The number of jobless is still likely to reach more than 3.8 million this year, after averaging 3.42 million, or 8.2 percent of the workforce, in 2009.
Economists say the economy has to be rebalanced from its dependence on exports towards more domestic driven growth, after estimating that activity weakened in the fourth quarter of 2009.
IHS Global Insight's Timo Klein concluded that in general, "the loss in economic activity is so large that a return to the GDP level of first quarter 2008 is unlikely before end-2012 or even 2013."
