Sharp rise in German jobless

GERMANY'S SOCIAL Democrat-led government, which came to power last autumn promising to vanquish unemployment, was jolted yesterday by a steep rise in the jobless figures.

A further 250,000 people were forced on the dole in December, pushing the headline unemployment figure back above four million for the first time since September. The unadjusted jobless rate now stands at 10.9 per cent, slightly above the European Union average.

As the mirage of new jobs fades, the government of Chancellor Gerhard Schroder is coming under increasing pressure to resort to traditional Keynesian methods of boosting the stumbling economy.

But Oskar Lafontaine, the Finance Minister and leading advocate in Europe of state intervention in the labour market, will try to duck the issue. Tensions between the government and the European Central Bank (ECB) are likely to rise as he puts the blame on excessively high interest rates. These stand at 3 per cent in euroland. Although Wim Duisenberg, the president of the ECB, has so far resisted calls for further interest rate cuts, most economists expect him to yield in the coming months.

Almost no expert expects the German economy to match last year's growth rate of 2.7 per cent. The government has pencilled in 2 per cent, most banks expect about 1.8 per cent, and this week the prestigious German Economic Institute (DIW) predicted 1.4 per cent.

Taking seasonal factors into consideration, the rise in joblessness last month was less bad than it appeared. German unemployment always rises in winter, and the seasonally adjusted jobless figure rose by a moderate 34,000 to 4.15 million.

But whatever the true state of employment, the latest figures seem to confirm the long- awaited slowing of the economy.