German jobless rate soars to 70-year high

Germany's unemployment has soared to its highest level since Hitler came to power in 1933, with figures yesterday showing that more than 5 million Germans are without a job.

The federal labour office announced that unemployment had shot up in January to 5.073m - an increase of 573,000 from the previous month. The jobless rate now stands at 12.1%.

Yesterday, however, Germany's economy and labour minister, Wolfgang Clement, shrugged off the rise and said it could largely be explained by his controversial labour market reforms that came in last month. Under the changes, known as Hartz IV, welfare recipients have been classified as unemployed for the first time.

Speaking yesterday in Berlin, Mr Clement admitted the figure was "alarming". But he said there was no need for "hysterical talk" and predicted that unemployment would rise again in February but would drop in March and April, with a significant fall in the second half of the year.

The 5 million total marks a post-second world war record for Germany, Europe's largest economy, and comes after three years of sluggish or near-zero growth. Growth this year is likely to be just 1.6%, the government believes.

Against this background of deepening national gloom, there has been a political resurgence of the far right, with the neo-Nazi National party of Germany winning 9.2% of the vote in regional elections in Saxony.

The result stunned Germany's political establishment. The government is now considering a ban on rightwing extremists. But yesterday Mr Clement said it was "absurd" to compare present-day Germany to the early 1930s, when soaring unemployment contributed to Hitler's rise to power and the demise of the Weimar republic. "The job market is not in a good condition. But there is no point in having historical seminars," he said.

The previous postwar record was set in January 1998, in the last months of Chancellor Helmut Kohl's government, when 4.824 million people were out of work.

After winning the subsequent election, Germany's current chancellor, Gerhard Schröder, promised to reduce unemployment to 3.5 million. It is a pledge he has not yet kept.

Mr Schröder's Social Democratic party (SPD) has enjoyed a revival in its political fortunes but faces a tricky few months, with regional elections in the state of Schleswig-Holstein this month, and an important poll in May in the Social Democrat stronghold of North Rhein-Westphalia.

Yesterday Angela Merkel, the leader of the opposition Christian Democrats, accused the chancellor of having "no concept" for reducing unemployment. "He can't bring Germany out of this difficult situation," she said.

Christian Jasperneite, an economist with MM Warburg, said: "With the figures apparently the worst we've seen in the postwar period, these numbers are very charged politically.

"They could well put an end to the recent renaissance we've seen by the SPD in the polls."

Despite all this, Germany remains an extremely rich country, with a flourishing export and manufacturing sector far superior to that of its European rivals. Yesterday, though, Mr Clement admitted that Germany could learn something from Britain, and praised the role of British jobcentres for working closely with both employers and the unemployed.

"This hasn't really happened here," he admitted. "This is what we have to change. It's a cultural change. It took years for Britain to do it. We are attempting to do it more quickly. But it won't happen overnight."

Other experts also believe unemployment is likely to get worse before it gets better. Asked yesterday whether it was safe to assume the figures had not yet peaked, the labour office deputy head, Heinrich Alt, replied: "Correct."

The latest figures confirm striking differences in jobless rates in different parts of Germany. Unemployment in the former communist east stands at 20.5%, more than twice that of the west, with 9.9%.

Since reunification in 1990, huge sums of money have been pumped into the east. So far, though, this investment in infrastructure has failed to generate sufficient new jobs.

Inevitably, this has led to growing frustration among east Germans who were promised "blooming landscapes" by Mr Kohl.