German unemployment fell slightly in September, according to official figures released yesterday, a week before the German parliament votes on reforms designed to revitalise the euro- zone's largest economy.

The unadjusted unemployment rate dropped from 10.7 to 10.1 per cent or 4.2 million unemployed last month. There were 107,000 fewer people out of work in September than in August - still 250,000 more than this time last year. The seasonally unadjusted unemployment figure fell to 4.392 million.

Mr Florian Gerster, head of the Federal Employment Office in Nuremberg, called the new figures a "black zero" and said that unemployment was unlikely to breach the politically sensitive five million mark in the first winter months.

"We are still considerably distant from a growth in employment but thankfully no longer in a clear area of growing unemployment," said Mr Gerster. "In 2003, we are still in choppy seas... In 2004 we will not, on average, see a breakthrough either," he said, suggesting that a significant improvement in Germany's unemployment situation is unlikely before 2005.

Mr Gerster said the fall in the jobless figure was partly due to reforms introduced by the government that simplify laws to become self-employed and give three-year financial support to those who set up companies.

Next week, the German parliament will vote on a second round of reforms of the employment market and the social welfare system. The Minister for Economics and Labour, Mr Wolfgang Clement, called the drop in unemployment a "sign that the first economic measures are having an effect".

However, German business leaders warned the government not to become complacent as a result of the slight fall in unemployment.

"The federal government cannot not wobble on its employment market reforms," said Mr Martin Wansleben, head of the German Chamber of Industry and Trade.