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BERLIN, Nov 12 (Reuters) - Germany should ramp up public investment spending to bolster Europe's largest economy as it faces a recession, the government's panel of economic advisers said on Wednesday.
The panel, known as the "five wise men", said in their annual report the economy would be "in recession" next year, even if full-year gross domestic product (GDP) growth is flat. The government recently forecast 2009 GDP growth of 0.2 percent.
"The European Central Bank should, in the coming year, make use of the available room for interest rate cuts," the advisers said, adding that Germany should use fiscal policy to stimulate domestic demand as the export sector faced a lean period ahead.
The advisers said they did not define a recession in the usual technical sense of two or more back-to-back quarters of negative economic growth, but that they looked instead at capacity utilisation levels.
Public sector investment had been cut as Germany put its public finances in order, and the government could now justify using debt to finance more investment, the advisers said.
Earlier this month, Germany's cabinet approved a package of measures which will generate about 50 billion euros ($63.12 billion) in investment and contracts to help the economy withstand the effects of the financial crisis.
The wise men called for more.
"In view of the usually high uncertainty about the economic outlook, the council of advisers calls not for short-term stimulus programmes but for fiscal measures to be used for an economically fair growth policy," they said.
"It is justifiable for net investments to be expanded next year and financed by a higher deficit," they added.
The report adds to a raft of gloomy predictions about the outlook for Germany next year. The advisers saw unemployment rising by 35,000 during 2009.
In a sign of how even flagship German firms are suffering, carmaker Daimler said last month it would shut two big German plants for a month due to a sharp drop in demand.
Auto parts maker Robert Bosch GmbH said last week it would shorten the working week for 3,500 workers at a plant in Germany for six months.
(Reporting by Paul Carrel; Editing by Victoria Main)