German Chancellor Angela Merkel said on Tuesday her government would stick to its budget target and would not increase government spending or raise new debt for economic stimulation.

Addressing a meeting of German employers association in Berlin, Merkel said German economy was stable, but faced risks from geopolitical tensions abroad.

Investment was needed to boost growth, she said, but her government would not spend more than its current plans, nor would new debt be raised. Instead, her government would encourage private investment by lifting burdens for the business.

"Investment is needed, but not with new borrowing," said the chancellor.

German government set a target of reaching a budget balance next year for the first time since 1969. Merkel said a balanced budget was reasonable considering Germany's demographic challenges.

German economy was slowing down as exports plunged and investment confidence hit by external uncertainties including modest global growth and tensions in Ukraine and Middle East.

Last month, German government cut its growth forecast to 1.2 percent from the 1.9 percent as previously expected. Endit

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