German leaders despair over record 4m jobless

IMRE KARACS

Bonn

Germany's economy drifted into uncharted waters yesterday as unemployment hit a post-war peak and the government admitted for the first time that the country was in the grip of a recession.

A rise of nearly 400,000 in the number of jobless in January brought the seasonally unadjusted figure to 4.15 million. One in 10 Germans is now out of work, and 1 million more are excluded from the official statistics by retraining schemes and early retirement.

After passing the 4 million mark, the question now is when the number of people out of work in western Germany, with a population only slightly greater than Britain's, will reach 3 million. At the end of last month it stood at 2.9 million, or 9.4 per cent of the workforce.

The east, still benefiting from a construction boom paid for by the west, also saw a leap in the figures to one and a quarter million, taking the unemployment rate from 14.9 to 16.8 per cent.

Records for bankruptcies are also tumbling. Last year was the worst for the famed Mittelstand, the small- and medium-sized enterprises that provide the backbone of the German economy, and 1996 is forecast to be gloomier still, forcing 29,000 businesses to the wall with the loss of 400,000 jobs.

The relentless tide of despair swept into parliament yesterday, with the opposition accusing Chancellor Helmut Kohl's government of ineptitude. "The government has lost its way," said Rudolf Scharping, the Social Democrats' parliamentary leader.

Mr Kohl, and his Economics Minister, Gunter Rexrodt, could only respond by waving a 50-point plan for halving the number of jobless by the year 2000. Though the programme was initially welcomed by all sides, closer inspection has revealed a large gap that Mr Rexrodt seems unable to finance without pumping up the already overblown budget deficit.

Yesterday the Economics Minister went through the items again, outlining minor infrastructure projects, minuscule tax cuts and promises to help business, but carried little conviction. "The government should take responsibility for the situation and make the necessary changes," Mr Scharping suggested, but he, like the rest of the establishment, had no economic miracle up his sleave.

"If you criticise our proposals, let's talk about whether you have better ones," Mr Kohl taunted the opposition. The Social Democrats, aware that there is no popular support for a "spend, spend, spend" approach, have been as reluctant as Mr Kohl to advocate a Keynesian boom. Left and right in Germany are united in their commitment to tax cuts, but neither side has so far found a magic formula which does not threaten to stoke up the deficit.

Perhaps, as some economists are arguing, the malaise goes deeper than the politicians are willing to recognise. The much-vaunted German model, which in the past 50 years has produced immense wealth and social consensus, is looking less formidable now in the face of growing international competition.

Government statistics show that Germany has lost jobs mainly to the US and other European Union countries.

Jobs crisis, page 17