This compares to a 3.1-percent deficit in the first half of 2010 and to a 5.4 percent deficit in the second half of 2010, according to Destatis, the federal office of statistics.

The improvement was due to a 6.0-percent increase in tax revenues compared to tax income in the same period last year, and to slower spending which increased by just 0.3 percent compared to expenditure in the first half of 2010, Destatis said.

However, Destatis said that the overall 2010 deficit figure stood at 4.3 percent, up on previous estimates, because of the need to account for negative equity held by state-controlled "bad bank" Hypo Real Estate.

As eurozone partners work on ever tighter austerity plans to balance their books, Germany is well ahead in the strength of its finances despite having spent heavily on stimulus programmes to offset the worst recession since 1945.

The government expects a 1.5 percent public finance deficit for this year and hopes to break even in 2014.