3.86 million now unemployed in Germany

Unemployment in Germany has risen for the seventh month in a row, in the latest blow to Chancellor Mr Gerhard Schr÷der's hopes of bringing unemployment under 3.5 million before elections next year. The number of people out of work rose by 11,000 to 3.864 million when seasonally adjusted, or 9.3 per cent.

That is a smaller rise than the June figure of 20,000, but still well above the EU average.

Industrial production fell 0.4 per cent in June after a 0.9 per cent rise in May, but the fall was less dramatic than had been predicted and was up 1.1 per cent on this time last year. "The economic slowdown is leaving a firm mark on the German labour market once again," said Mr Bernhard Jagoda, head of the German labour office.

"As previously, [export dependent]western Germany has once again been hit by the worsening economic outlook," he said.

Mr Jagoda said he was sticking to a forecast from his office that unemployment would average 3.7 million in 2001, on an unadjusted basis. However a "strong autumn upswing" will be necessary to reach this goal, he said.

Mr Jagoda said that the unemployment figures should allow for above-inflation increases at the next round of wage negotiations between unions and employers' groups. German employers' organisations said the figures demonstrate that the German employment market needs "urgent new impulse for reform".

"We need an unprecedented offensive on flexibility and urgent deregulation of the employment; the government must now start negotiating," said a spokesman for the German Employers Association (BDA).

The opposition CDU said an employment "catastrophe" was looming, and accused the federal government of "playing the politics of doing nothing". "With his self-proclaimed 'politics of the silent hand', Gerhard Schroeder is punishing the unemployed by failing in his obligation to help them," said Mr Hermann-Josef Arentz, of the CDU.

Bavaria's conservative minister president, Mr Edmund Stoiber, said the federal government's employment policy was "weighing down" business. The latest economic data clouds prospects of the European Central Bank's (ECB) anticipated cut in euro zone interest rates later this month.

The continued rise in unemployment follows a summer of redundancy announcements from major German firms. Yesterday, BASF announced it was cutting another 1,200 chemicals jobs worldwide, bringing its total cut this year to 4,000 after second-quarter earnings fell 98 per cent. The slowdown in economic growth is stifling the creation of new jobs in Germany - meaning queues at employment offices are likely to keep growing in coming months.

The main political parties have presented differing proposals on how best to tackle rising unemployment in Germany. The conservative opposition has called for far-reaching overhaul of the employment market, as well as reform of social welfare and of the collective bargaining law.

But Mr Schr÷der is a firm believer in "the politics of the silent hand" and he hopes to invigorate labour policy after the parliamentary summer recess with new legislation titled "Activate, qualify, train, invest, mediate".

The proposed legislation addresses long-term unemployment and seeks to improve the "fit" between employers and job-seekers sent on by federal labour offices. The proposals enshrine in law Mr Schr÷der's now notorious proclamation that "no German has a right to laziness".

If a job-seeker refuses an offer of work without good reason, the federal labour office could, under the legislation, suspend unemployment benefits for 12 weeks.

The conservative opposition published its own far-reaching proposals last June in a manifesto called "Work for All". The proposals take an even harder line on job-seekers who refuse job offers, demanding that they lose all benefits completely and permanently.