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Germany's Unemployed Surpasses 4 Million - 2002-02-06

The number of people who are unemployed in Germany has now surpassed the crucial figure of four million, or more than 10 percent of the working population, according to figures released Wednesday by the Federal German Labor Office. The growing number of people on the dole poses economic and political problems for Chancellor Gerhard Schroeder.

The recession in Europe's biggest economy continues to take its toll. After contracting slightly in the third quarter of 2001, and widely believed to have shrunk again in the fourth quarter, prospects of short-term recovery for the German economy are nowhere in sight.

The news that the number of jobless people rose to a total of 4.2 million in January from 3.9 million the month before only serves to exacerbate the problem.

Chancellor Gerhard Schroeder, who faces a re-election battle in September, is under fierce attack from his conservative opponent, Edmund Stoiber, for failing to fulfill a promise to reduce unemployment to 3.5 million.

Financial analyst David Thwaites, of BNP Paribas in London, says unemployment will not drop from the four million mark until the middle of this year, and that is uncomfortably close to the election date.

"That is a very politically sensitive level, and it's bad news for Mr. Schroeder, indeed," he said. "And, there's only one way that unemployment is going to keep going, certainly, for the first half of this year, and that is further up."

The rise in unemployment not only threatens Mr. Schroeder's election prospects. It could also jeopardize the German government's efforts to get its finances in order at a time when the country's spiraling public deficit is already causing tension between Berlin and the European Commission, the European Union's executive body.

The commission wants other member states to warn Germany to get its budget back in line when EU finance ministers meet in Brussels next week. The euro-zone's stability pact mandates limiting budget deficits to three percent of gross national product, and Germany's deficit is now running at 2.6 percent. But diplomats in Brussels say Germany has already convinced other leading EU countries that it must increase spending in order to fight its way out of recession.

The diplomats say that, what now seems likely is that the finance ministers will urge Germany to watch its deficit closely, but will not call on Berlin to change its economic policy.