Unemployment Rises in Germany

German unemployment will average 3.893 million in 2002, according to new government estimates. This means that Chancellor Gerhard Schröder will fall a long way short of his aim of bringing the average jobless total below 3.5 million in election year.

The new estimate, which comes out at 50,000 more than the average figure expected for 2001, was issued on Thursday by the Labor Ministry.

On becoming Chancellor in September 1998, Schröder said he would stand or fall on whether he managed to effect a noticeable reduction in unemployment. The average annual figure of 3.5 million was first named as a target in May 2000.

The government on Thursday also announced the abandonment of another of its aims for 2002. It had been planning to reduce pension contributions to 19% of wages from 19.1% with effect from 1 January 2002, but it said on Thursday that this would now prove impossible.

The government pointed to unfavorable economic developments and the failure of the hoped-for upturn in employment to materialize as the factors that had prevented it from adhering to its plan.

To ensure that it did not have to raise pension contributions, the government said that it planned to reduce the minimum amount that had to be kept in reserve by the state pension coffers from 1 month's pay-outs to 0.8 month's pay-outs.

It said a draft amendment to the law was being drawn up, and added that he environmentalist Greens, junior partner in the governing coalition, had pushed for a further reduction in the minimum reserve in order to enable the government to adhere to its original plan to cut contributions.