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German jobless rate down but Waigel gives warning

The continued rise in German unemployment levels was finally halted last month. However, Theo Waigel, Finance Minister, admitted yesterday that the government's targets on reducing unemployment would not be met.

The German Labour Office said that unemployment fell by 15,000 to a seasonally adjusted 4.3 million in March. February data were also revised to show a decline in joblessness, the first since April 1996.

German central bank figures put the seasonally adjusted March jobless rate at 11.2 per cent of the workforce, down from 11.3 per cent in February. But Labour Office officials said there was little sign that the economy was creating new jobs.

Mr Waigel said: "We cannot rule out that unemployment levels will be higher than the 4.2 million stated in the [government's] annual economic report."

He accepted that the labour market's stubborn performance would affect the federal budget. But he insisted there would be "no direct influence on the timetable for introducing the euro".

The government immediately came under fire over the labour figures from opposition politicians, employers and union officials. Trudolf Scharping, parliamentary leader of the opposition Social Democrats, said the unemployment figures indicated that all the government's budget data for this year were skewed. He predicted the May tax estimate would show much larger revenue shortfalls than expected.

Dieter Hundt, president of the German Employers Federation, said that the government had gone back on promises made last year to lower the high social security costs faced by employers when taking on staff.

"These promises have not been fulfilled in the last 14 months," Mr Hundt said, referring to the failed "alliance for jobs" pact early last year that sought to link job creation to moderate wage demands by German unions.

Germany's top union officials urged employers and government to work with unions to reduce unemployment. Dieter Schulte, chairman of the German Trade Union Federation (DGB), warned of serious consequences if the attempt failed. He said government and business had missed a "great chance for co-operation" with the alliance for jobs idea.

Trade unions last year walked away from the jobs pact when the extent of the spending cuts in Bonn's current austerity package started to become known.

Hinting that the DGB and its member trade unions would be ready for a second attempt at co-operation with employers and politicians, Mr Schulte said that a mood of "give and take" was now required.