Tuesday, February 11, 2003

German Unemployment at Five Year High

As if to confirm my recent preoccupation about what is happening in Germany, these latest figures paint a pretty grim picture:

German unemployment rose significantly more than expected last month in a further sign of the gloom overshadowing the eurozone's biggest economy. Seasonally adjusted unemployment jumped by 62,000 month-on-month to reach 4.27m, or 10.3 per cent of the workforce. The unadjusted figure, which is more closely watched in Germany, soared by almost 400,000 compared with December to reach 4.62m - the highest level in five years. The figures showed a particularly steep climb in western Germany, normally seen as a more accurate barometer of the economy than the economically depressed east. The Federal Labour Agency said on Wednesday that seasonally adjusted unemployment in the west climbed by 46,000 to reach 8 per cent of the workforce. In the east, the jobless total rose by 16,000 to reach 1.6m, or 18.2 per cent of the total.

This week's electoral routs have pushed the SPD-led coalition government into intensifying calls for economic and social reforms to boost the labour market and reduce the financial pressures on the stretched welfare state. However, in the short term, the sharp rise in unemployment will most likely hit private consumption, while raising the funding pressures on the welfare state. In particular, the sharp increase could make the government's budgetary goal of eliminating subsidies for the state unemployment insurance scheme more difficult than ever this year. "The implications are straightforward", said Holger Fahrinkrug, eurozone economist at UBS Warburg in Frankfurt. "Today's data exert more downward pressure on German growth forecasts, especially for private consumption, and increase the pressure on the budget".
Source: Financial Times

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