German unemployment leaps to post-war high

Records were tumbling in Germany again yesterday as unemployment leapt to a new post-war high, registering the biggest monthly increase since the early 1930s.

The headline unemployment figure rose by half-a-million, but even the seasonally adjusted total for January stood at 4.317 million - an increase of 160,000 from December. The rise was three times what analysts had forecast, and pushed the adjusted unemployment rate to 11.3 per cent.

Britain's Trade Secretary, Ian Lang, seized on the figures, claiming that they showed European social policies were not working. Mr Lang said: "It is a total vindication of the Prime Minister's warning to Europe on Tuesday that continental social policies are destroying jobs, while in Conservative Britain we are creating them."

However, economists disagree about how far the German unemployment problem is a result of labour market rigidities rather than the continued impact of unification, or the effort to meet the Maastricht criteria. Furthermore, the theory that deregulation has improved Britain's employment performance in the long run remains to be proven.

Much of last month's increase in German unemployment is attributed to the cold spell in January which affected the construction industry for most of the month. Bernhard Jagoda, head of the Federal Labour Office, said: "This figure cannot be made to look good, but it should also be recognised that the situation in January contains seasonal unemployment, and it follows that in spring we can reckon with a clear reduction."

However, there are indications that the long-awaited recovery might not be as powerful as predicted, slowing the prospects for employment growth later in the year.

British Conservative politicians are not the only ones to blame persistent high unemployment in Germany on labour market policies. Even the Bundesbank president, Hans Tietmeyer, has argued recently that Germany and other European countries need to tackle labour market rigidities.

Gilles St Paul, research fellow of the Centre for Economic Policy Research, said: "The US and the UK have more flexible labour markets. In downturns unemployment rises very quickly. But the US seems to have avoided the ever-increasing trends in unemployment that continental European countries have seen."

Juan Jimeno, also a CEPR research fellow, claims union power, job security legislation and unemployment benefits all contribute to keeping European unemployment high.

But Professor Richard Layard at the LSE's Centre for Economic Performance said: "The German system is not deplorably rigid; the German economy remains fundamentally one of the healthiest economies in the world. Unemployment is high because Germany is still at the bottom of the cycle, after an inflationary boom in the early Nineties."

In a new book, What Labour Can Do, to be published next week, Professor Layard argues that the German economy is still adjusting to the huge transfer of wealth, investment and jobs from west to east. Czech and Polish markets opening up to the east have provided a further competitive drain on new jobs and investment in Germany, to which the German economy is only just starting to respond.

Moreover, there is no conclusive evidence yet that the UK version of deregulation has improved its employment performance relative to Germany. Alan Manning, of the Centre for Economic Performance explains: "What we don't yet know is how far UK unemployment will fall before inflation picks up again."

Even the UK government's own Labour Market Trends concluded in December that "the UK has performed better in the Nineties upturn than it did in the 1980s".

Mr St Paul SAYS: "The UK is a bit of a mystery. The real problem is the number of very unskilled - there are fewer of them in France or Germany."

Some economists believe continental unemployment has also been held up by tight monetary and fiscal policy in Europe as countries try to meet the Maastricht criteria.

Others claim the Maastricht timetable gives countries an incentive to sort out their economies in a hurry. Speaking to the CBI in London yesterday, EU Commissioner Yves-Thibault de Silguy said: "There is no doubt that the EMU timetable is helping to maintain the pace of economic reform."

Comment, page 19

Arts and Entertainment
Characters in the new series are based on real people, say its creators, unlike Arya and Clegane the Dog in ‘Game of Thrones’
tv'The Last Kingdom' embraces politics, religion, warfare, courage, love and loyalty, say creators
Sport
Sergio Romero saves Wesley Sneijder's penalty
world cup 2014But after defeating the Dutch, Lionel Messi and Argentina will walk out at the Maracana on Sunday as underdogs against Germany
Sport
Scoreboard at the end of the semi-final World Cup match between Brazil and Germany at The Mineirao Stadium in Belo Horizonte
Sport
'Saddest man in Brazil' takes defeat with good grace, handing replica trophy to German fans
PROMOTED VIDEO
News
peopleThe Game of Thrones author said speculation about his health and death was 'offensive'
Arts and Entertainment
Martin Freeman and Lauren O'Neil in Jamie Lloyd's Richard III
theatreReview: The monarch's malign magnetism and diabolic effrontery aren’t felt
News
Glamour magazine hosts a yoga class with Yogalosophy author Mandy Ingber on June 10, 2013 in New York City.
newsFather Padraig O'Baoill said the exercise was 'unsavoury' in a weekly parish newsletter
Extras
indybest
News
people'She is unstoppable', says Jean Paul Gaultier at Paris show
Sport
Alexis Sanchez and apparently his barber Carlos Moles in Barcelona today
football
Arts and Entertainment
Miley Cyrus has her magic LSD brain stolen in this crazy video produced with The Flaming Lips
video
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
In his own words: Oscar Wilde in 1882
theatreNew play by the Oscar Wilde's grandson reveals what the Irish wit said at his trials - and what they reveal about the man
News
people
Arts and Entertainment
Unless films such as Guardians of the Galaxy, pictured, can buck the trend, this summer could be the first in 13 years that not a single Hollywood blockbuster takes $300m
filmWith US films earning record-breaking amounts at the Chinese box office, Hollywood is more than happy to take its lead from its new-found Asian audience
News
The garage was up for sale in Canning Place Mews for £500,000
newsGarage for sale for £500,000
Life and Style
tech
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Financial Planning Manager, Qual Accountant, £380

£300 - £380 per day: Orgtel: Financial Planning Manager, Banking , London, £30...

Business Analyst - Financial Services, Trading Systems, Agile

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fina...

Day In a Page

The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

Grindr founder Joel Simkhai: 'I've found love on my dating app'

Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

Is it time to ditch autocorrect?

Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
10 best girls' summer dresses

Frock chick: 10 best girls' summer dresses

Get them ready for the holidays with these cool and pretty options 
Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

Westminster’s dark secret

Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

A History of the First World War in 100 Moments

Dulce et decorum est: a life cut short for a poet whose work achieved immortality
Google tells popular music website to censor album cover art in 'sexually explicit content' ban

Naked censorship?

The strange case of Google, the music website and the nudity take-down requests
Howzat! 8 best cricket bats

Howzat! 8 best cricket bats

As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

David Luiz falls from leader figure to symbol of national humiliation

Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil