Alarm at German jobless rate

The number out of work in Germany leapt by 68,000 last month, bringing the national unemployment rate to within a whisker of 10 per cent, and fuelling fears about the health of Europe's largest economy.

The figures came as former Chancellor Helmut Schmidt described the German economy as a "shackled Gulliver" with over-regulation inhibiting investment. He warned that the overvalued German mark was the most negative factor in the economy.

The former Social Democrat leader called for cuts in both public spending and taxation.

"If we don't want endless strikes like in Paris, class war like in England or a crippling of public services like the United States, then we must pull ourselves together in 1996," he warns in tomorrow's weekly edition of Die Zeit.

Figures released by the Federal Labour Office yesterday showed that seasonally adjusted unemployment rose by 68,000 in December to stand at 9.9 per cent of the workforce. The unadjusted total rose by 212,000 to 3.8m.

The statistics also indicated that the so-called "unity boom", driven by soaring demand in the east, was over. There were massive job losses in the eastern part of the country, taking the unemployment rate to 15.2 of the workforce.

In the west, unemployment rose to 8.6 per cent. Another 1m workers on retraining schemes or in early retirement are excluded from the statistics.

The latest figures suggest that the economy is slowing down far more rapidly than the government had predicted. The Economics Ministry had forecast stagnation in the second half of the current financial year, with growth resuming in the summer. But even if that were to happen, the number out of work will cross the psychologically important 4m barrier by the spring, and the jobless rate will hit double figures, probably next month.

Alarmed by the rate at which German jobs are disappearing, often to foreign countries, the government has endorsed a proposal by the largest trade union IG Metall for a pact between workers and employers. Last year the 3-million strong engineering union resorted to strikes to extract an annual four-per cent pay rise over two years.

Now IG Metall is calling for an "Alliance for Jobs" with employers, and is prepared to keep next year's wage demands at the level of inflation, currently less than two per cent. In exchange, it wants a commitment from the employers to create 300,000 new jobs by 1998.

Gesamtmetall the employers' organisation, said it was unfair to expect employers to conjure up 100,00 jobs this year while the workers were about to receive their 4 per cent wage increase. The employers also wanted lower starting wages for those returning from long-term unemployment and proposed to trim holiday bonuses.