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Germany

German Unemployment Rises as Economic Downturn Continues

Germany's unemployment rate rose more than expected in December, data released Wednesday showed, bringing to an end a long run of monthly falls and adding to signs of the tough year ahead for Europe's biggest economy.

An unemployment office in Kassel

The financial crisis seems to have hit the labor market

The country's dole lines swelled by a seasonally adjusted 18,000 last month, the nation's Labor Office said, some 8,000 more than many analysts had expected.

German unemployment numbers rose by 114,000 in December to a total of 3.1 million, the Labor Office said.

This pushed the unadjusted unemployment rate up from 7.1 percent in November to 7.4 percent last month. The jobless rate stood at 8.1 percent in December 2007.

"The December (2008) figures show that the economic crisis has reached the labor market," said Labor Office chief Frank-Juergen Weise when releasing the data. "This has also dampened our optimism for 2009."

Slumps all around

A woman with her head in her hands, behind stacks of paper

German employment had peaked in 2008 before dropping off

Wednesday's jobless data also helped set the stage for the publication later this week of another bleak round of German economic data encompassing figures recording another drop in the nation's key exports in November on the back of a shrinking global economy and the recent rise in the euro.

At the same time, data is expected to show a 2-percent slump in industrial production and a 1.6-percent contraction in German factory orders as 2008 came to an end.

Combined with a sharp fall in inflation, the grim economic news emerging from Germany is also likely to increase pressure on the European Central Bank to press on with its rate-cutting cycle.

Plans for layoffs

German employment levels hit a record 40.3 million last year to reach the highest level since reunification in 1990 as solid economic growth and labour market reforms helped to boost hiring in recent years.

More recently, however, German companies have announced plans for layoffs and production cuts as they face up to what could be the biggest economic downturn since the end of the Second World War.

Chancellor Angela Merkel's ruling coalition are hoping to formally sign off next week on a second economic stimulus package worth up to 50 billion euros ($68.2 billion) over the next two years and which is partly aimed at underpinning economic growth through a batch of infrastructure projects.

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