By Andrea Thomas

BERLIN--Germany's government posted a budget surplus of 6.2 billion euros ($6.5 billion) in 2016, supporting Chancellor Angela Merkel's positive economic record as she campaigns to win a fourth term in this fall's national election.

The finance ministry said Thursday that a strong economy, low interest rates, higher tax revenues and a robust labor market helped achieve the third budget surplus in a row.

It was, however, lower than the EUR12.1 billion surplus in 2015, which was the highest since the end of World War II.

German Finance Minister Wolfgang Schaeuble said he would propose to parliament that the surplus be used for debt redemption to boost the long-term sustainability of Germany's public finances. The government's debt reached EUR1.27 trillion in 2016.

"It's historically unique that we achieved budget surpluses for three years in a row," said a finance ministry official, who declined to be named.

"With this, we can send an encouraging signal of stability and a signal that it's possible to consolidate, generate surpluses and at the same time to give investment and growth incentives."

The government has EUR6.1 billion in untouched reserves that it put aside in late 2015 for accommodating and integrating the over 1 million asylum seekers who have arrived in Germany since 2015.

Earlier Thursday, government data showed that Germany's economy grew by 1.9% in 2016, propelled by a buoyant labor market and a pickup in government spending, making it one of the fastest-growing of the Group of Seven industrialized nations.

Some critics say the government is focusing too much on the migration crisis and neglecting other issues. There are also suggestions that the government should cut income tax substantially, given the budget surpluses in previous years.

The government has said it wants to use the fiscal leeway for income tax cuts after the election.

Overall government spending reached EUR311.2 billion in 2016, EUR5.7 billion less than penciled into the budget, with tax revenues overshooting the previous target by EUR0.9 billion.

The government aims to have a balanced budget through to 2020.

Write to Andrea Thomas at andrea.thomas@wsj.com

(END) Dow Jones Newswires

January 12, 2017 06:01 ET (11:01 GMT)

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