Jobless rise puts Schroeder at risk

Schroeder has staked his political reputation on reducing unemployment

BERLIN, Germany -- The latest consecutive rise in German unemployment could well cost Chancellor Gerhard Schroeder his job as well.

Schroeder made reducing unemployment to 3.5 million a priority during his term in office.

In his New Year's message he told Germans that preserving and creating jobs would be his "most urgent priority" for 2002.

But with Wednesday's announcement that the total number of unemployed in Germany now stands at 4.3 million, his bid for re-election later this year has been dealt a blow.

Inflation has also been rising, reaching 2.4 percent in 2001, up from 2.1 percent the previous year and 0.6 percent in 1999.

MORE STORIES German jobless rate soars    EXTRA INFORMATION Profile: Edmund Stoiber  Profile: Gerhard Schroeder    COUNTRY PROFILE At a glance: Germany Provided by CountryWatch.com

Last week, the European Commission recommended that Germany be formally warned that its budget deficit is close to exceeding EU limits.

It marked the first time the commission called on EU states to warn another member about a budget deficit, since the Stability and Growth Pact was adopted in 1997.

Schroeder's personal popularity has slipped on the back of an economic downturn and rising unemployment, while ratings for his Social Democrats fell from 41 percent to 39 percent, a poll by the Electoral Research Group for ZDF TV found last month.

The economic figures will also be ammunition to Edmund Stoiber, leader of the Christian Social Union and Schroeder's conservative opponent in September elections, who continues to hammer away against the chancellor's economic record.

The German economy is likely to grow 0.75 percent this year, the government said last week, after expanding 0.6 percent last year.

But Schroeder has said Germany needs growth of at least 2 percent to create jobs and reduce unemployment.

As a result of the worsening economic climate in Germany, Schroeder has already abandoned his pledge to reduce the number of unemployed to 3.5 million by polling day.

He is now promising a push to create more low-wage jobs and public investment.

Last month, he defended his government's record after three years in power, highlighting the tax and pension reforms it had passed and noting its commitment to cutting state borrowing, creating leeway for the European Central Bank to ease interest rates

He has also pointed out that 4.5 million people were out of work the winter before he took office.

Schroeder has said: "Germans know that the (economic) standstill in the country was caused by those who are now staking their claim to power, Herr Stoiber included.

"The voters will not set a thief to catch a thief."

Stoiber says that Schroeder's Social Democrat-Greens coalition has not done enough to liberalise Germany's notoriously rigid labour market reform to help create jobs.

Poll rival Stoiber believes Schroeder's policies threaten the economy

He favours tax cuts for small businesses and labour market deregulation. Stoiber has said: "Schroeder's policies are leading the country the wrong way. Because of bad policies, Germany is in an economic decline.

"(We have) the lowest growth in Europe and four million unemployed. Germany's place as a leading industrial power is endangered."

German Finance Minister Hans Eichel says, despite the unemployment figure, the government has succeeded in creating more than one million jobs since taking power in 1998.

But analysts say the jobless figures may not start to fall appreciably before the middle of the year -- too late to possibly save Schroeder's election campaign.

Peter Meister, an economist at BHF-Bank in Frankfurt, told Reuters: "The unadjusted jobless total will continue to rise and peak at above 4.3 million in February, after which it will fall due to seasonal effects.

"But the more significant seasonally-adjusted jobless total will be stuck at above four million at least until the autumn. It doesn't look good."