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UPDATE 2-German government slashes GDP growth forecast as extended lockdown bites

* Government sees 3% 2021 GDP growth vs 4.4% previously

* Economy to regain pre-crisis level in H2 2022

* Must stick with restrictions in coming weeks, minister says (Adds fresh Altmaier quotes, Scholz)

BERLIN, Jan 27 (Reuters) - The German government on Wednesday slashed its growth forecast for Europe’s largest economy to 3% this year, a sharp revision from last autumn’s estimate of 4.4%, caused by a second coronavirus lockdown.

Economy Minister Peter Altmaier said he expected the upswing to continue in 2022 and for the economy, which suffered its second-biggest economic plunge in post-war history last year, to regain its pre-crisis level in the second half of next year.

“We are currently seeing a flattening of the number of infections, which is giving hope,” Altmaier said, but he cautioned that the situation remained serious because of a more infectious virus variant.

“We must therefore not gamble away what has been achieved,” Altmaier said, against the backdrop of calls to ease lockdown measures soon.

Chancellor Angela Merkel and state leaders agreed last week to extend the lockdown until mid-February as Germany, once a role model for fighting the pandemic, struggles with a second wave and record daily numbers of COVID-19 deaths.

“Now is not the time to talk publicly about opening up and easing (restrictions),” Altmaier said. “We must have the patience in the coming days and weeks to carry on with our measures until the health risk for citizens is adequately reduced.”

Altmaier painted a picture of a two-speed economy in which industry continued to do well while services were was suffering under the curbs that were imposed early in November and tightened in mid-December.

“The picture is divided: While industry currently continues to be robust, the service sector is badly affected,” Altmaier said, adding that this was slowing down the recovery.

The economy shrank by a smaller-than-expected 5% last year. That was surpassed in the post-war era only by the record -5.7% in 2009, during the financial crisis.

Altmaier said there was a broad consensus in the ruling coalition for sticking in future with Germany’s debt brake, which parliament used an emergency clause to suspend for 2020 and 2021 because of the COVID-19 pandemic.

The law, enshrined in the constitution, normally restricts new federal borrowing to 0.35% of economic output.

“In the coming years, efforts will be needed to avoid future generations being excessively burdened by the expenditures we have to make now,” Altmaier said.

Berlin took on net new debt of 130.5 billion euros in 2020, the highest annual borrowing in its post-war history. Finance Minister Olaf Scholz plans to increase that to up to 180 billion euros this year.

“The challenges are enormous, but with a view to the other large European economies, we are coming through this crisis comparatively well,” Scholz said of the recovery.

Reporting by Michael Nienaber and Paul Carrel; additional reporting by Christian Kraemer; editing by Thomas Seythal and Larry King

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