Germany's jobless could reach five million this year

Germany's joyless recovery conjured up another post-war record in unemployment last month, raising the number of people out of work by 49,000 to a seasonally adjusted total of 4.46 million.

The figures, released yesterday by the Federal Labour Office, were much worse than expected, and foreshadow a miserable winter dominated by lengthening dole queues. Bernhard Jagoda, president of the Labour Office, was unable to rule out the possibility of breaching five million later in the year.

Mr Jagoda drew solace yesterday from the encouraging trend in western Germany, where dole queues are now growing only slowly. "The trough should now have been reached in the western Lander," he said. "But in eastern Lander the decline in the number of jobs continued."

That the east should bear the brunt of the winds lashing Germany is not surprising. The building industry is in the doldrums; consumption by the lucky few who have real jobs is stifled by companies tumbling like ninepins. With little to export, the industry of the east has been unable to reap the rewards of the low Deutschmark.

What has stunned observers is the failure of the west's export-led mini- boom to percolate through to the workers. "The most disappointing aspect of the rise in unemployment," said the analysts of UBS bank, "is that the recent surge has not led to job creation at all."

The factories of the west amassing record profits are obviously refusing to hire, opting to speed up production or keep their customers waiting. With the government's tax reforms stuck in the parliamentary gridlock, companies are not prepared to commit themselves to extra staff.

"Nothing is happening in the political world in terms of reform," said Hans Peter Stihl, president of the Federation of German Chambers of Commerce. As he spoke, the Bundestag was again submerged under mutual recriminations, with government and opposition blaming each other for the impasse. After the debacle in the summer, when his tax proposals were shot down by the upper house, Theo Waigel, the finance minister, yesterday attempted a relaunch: "I call on all responsible politicians to take off their blinkers and find a compromise on the tax reform."

Mr Waigel wants to cut DM30bn out of German tax bills, easing the companies' wage burden. But the opposition, flexing its muscle ahead of national elections due in a year's time, is refusing to let him have his way.

The slump in the jobs market at the time of an economic upturn is putting strain on Germany's efforts to qualify for European monetary union. Higher than expected spending on the unemployed will jeopardise Germany's chances of meeting budget deficit goals laid down by the Maastricht Treaty. To balance the soaring cost of the dole, Mr Waigel must trim spending somewhere else, which will put someone else out of work. This is quite a task, and probably explains why he has spent the last month begging Chancellor Helmut Kohl to give him another - any other - job.