German labour official sacked over contracts

Germany's reform programme has suffered a serious setback after the man selected by the Chancellor, Mr Gerhard Schröder, to shake up the labour market was unceremoniously sacked.

Mr Florian Gerster, head of the Federal Employment Office (BfA), was fired on Saturday after it emerged he had improperly awarded contracts. In reality, however, he was pushed out by unions and employer representatives who opposed his reforms.

"Florian Gerster had, in a difficult economic period, taken on one of the most challenging reform tasks and had made good progress," said Mr Wolfgang Clement, the labour and economics minister, saying he "regretted" the decision to oust Mr Gerster. He called the reform of the BfA "the core part of the reform work in Germany. All of Europe is waiting for us to succeed," he said.

Mr Gerster is the second man in less than two years to vacate the unloved top seat at the BfA, a monolith government agency based in Nuremberg with over 90,000 employees and an annual budget of €53 billion. His predecessor was forced out after it emerged that figures for successful job placements were widely inflated.

Mr Schröder stepped in to end the scandal and gave the job to Mr Gerster, a Social Democrat, in a blaze of publicity. Mr Gerster had ambitious plans to put greater pressure on the jobless to take work or face welfare cuts and to change the BfA's focus from simply managing Germany's four million unemployed to job placement But his management style alienated many at the BfA. On Saturday the board voted by 20 votes to 1 to sack him after media reports that he had awarded valuable consulting contracts without putting them out to tender. It is widely believed the information came from within the BfA to weaken Mr Gerster.

His departure now could not have come at a less favourable time for Mr Schröder. New employment legislation passed before Christmas has just become law and, with many changes still to come, the German employment market resembles a huge building site. Now Berlin has lost its foreman in the middle of the construction work.

A hurried search for a successor has already begun as Mr Schröder wants a smooth changeover. Not just to keep labour market reforms on track but also to minimise the political damage ahead of important state elections later this year.