Germany plans net new borrowing of 26.1 billion euros (22 billion pounds) next year, some 4 billion euros more than this year's estimated borrowing, as a deepening euro zone debt crisis drags on Europe's largest economy and stalls tax revenue growth.

Germany's economic growth has surprised on the upside this year, enabling it to more than halve its initial planned new borrowing and take the moral high ground in urging ailing euro zone peers to save and consolidate, after busting euro zone deficit rules itself in 2010.

This year's net borrowing is seen at 22 billion euros, more than half an earlier estimate of 48.4 billion.

The 2012 budget of 306 billion euros shows a planned increase in expenditure of 0.1 percent, the government said, noting this was significantly lower than expected inflation of 1.8 percent.

The budget falls well within the euro zone's budget deficit limit of 3 percent of gross domestic product, and gives Germany adequate space to meet its new debt brake law, the government said.

This is a budget where as a pure saver you might have wanted more ... but it is a realistic budget, said Otto Fricke, budget spokesman for junior coalition partners the FDP Liberals, pointing out that markets have rewarded Germany for its prudence with lower interest costs.

The troubles of Germany's most heavily indebted partners in the euro zone have driven down Berlin's borrowing costs as investors seek security in its benchmark Bunds.

Opposition parties however criticised the government for increasing borrowing next year at a time when others are making painful spending cuts.

The new borrowing figure, laid out in a draft budget drawn up by parliament's budget committee in the early hours of Friday, was slightly below the 27.2 billion euros originally sought by the government.

Germany's economy has been a star performer in the industrialised world since the end of the 2008 financial crisis and has underpinned growth across the euro zone. But a deepening debt crisis has battered confidence at home and abroad, forcing analysts to rein in 2012 growth forecasts.

Berlin estimates growth of 2.9 percent this year, fading to 1 percent next year. This means 2011's strong tax revenues and lower social expenditure are not expected to continue in 2012, while new costs emerge.

These include funding for holiday bonuses for state employees, at around 500 million euros, as well as a billion euros for additional transportation investment.

Carsten Schneider, budget affairs spokesman for the opposition Social Democrats, said Finance Minister Wolfgang Schaeuble was doing the opposite of what he is asking others to do, and thereby damaging his authority.

Germany's Bundestag, or lower house of parliament, is set to approve the 2012 budget at the end of the month.

Germany busted the euro zone's official deficit ceiling of 3 percent of GDP with a deficit of 3.3 percent in 2010. This year the budget deficit is estimated at 1.5 percent, meeting requirements two years earlier than required.

(Additional reporting by Matthias Sobolewski; Writing by Alexandra Hudson and Brian Rohan; Editing by Toby Chopra and Susan Fenton)