- The Washington Times - Tuesday, March 1, 2005

BERLIN — Germany yesterday reported its highest unemployment levels since World War II, fanning criticism that Chancellor Gerhard Schroeder’s tough welfare cuts aren’t working and highlighting a dramatic reversal of fortunes for his center-left government.

The number of people registered as out of work in February reached 5,216,000, up 177,000 from January, the Federal Labor Office said. The jobless rate jumped half a point to 12.6 percent, more than twice the U.S. level.

The office said the rise was partly caused by changes since Jan. 1 that require recipients of welfare aid to be included in the jobless data. Weak economic growth and cold winter weather, which reduced hiring in outdoor jobs such as construction, also were to blame, it said.

The figures come at a bad time for Mr. Schroeder, whose party faces an important regional election in the industrial state of North Rhine-Westphalia in May.

“Things looks a lot worse for the government than they did just a few weeks ago,” said Bernhard Wessels, political scientist at Berlin’s Free University. “Unemployment … poses the biggest risk for the government ahead of the North Rhine-Westphalia vote.”

Mr. Schroeder’s fortunes have declined precipitously in recent weeks.

His Social Democrats started the year invigorated by a strong recovery in opinion polls as the public grudgingly gave him credit for sticking to unpopular economic reforms that he insisted were crucial to Germany’s future prosperity.

His personal approval ratings also climbed, and analysts saw little to stop the charismatic, media-savvy leader winning a third term in 2006.

Two months later, there are no signs that his cuts in jobless benefits — the most radical reform of the German welfare state since the war — are working. Fear of unemployment is keeping consumer spending down, and companies are continuing to lay off workers because labor costs remain among the world’s highest.

Worse, analysts say, the government has been so worn down by two grueling years of unpopular reforms that it doesn’t want to inflict more pain on voters ahead of the 2006 general election.

Economy Minister Wolfgang Clement was rebuffed by his Cabinet colleagues when he suggested recently that Germany should cut corporate taxes now — a measure that many Social Democrats fear would anger their core voters at a time of rising unemployment.

Mr. Clement argued yesterday that the latest data had been skewed by statistical changes resulting from the welfare reforms. Excluding that factor, the jobless total was 4.85 million, a similar level to the winter of 1998, before Mr. Schroeder came to power, he said.

“The strength of exports has not yet fired up domestic demand,” said Mr. Clement, who called for all levels of government to boost public investment and for companies to show “modern patriotism” by creating jobs.

The latter was seen as a swipe at Deutsche Bank, the country’s biggest bank, which last month announced that it would shed 6,400 jobs despite an 87 percent surge in profits last year.

Opposition leaders were quick to jump on the bad news. Conservative leader Angela Merkel said: “The government has no idea how to improve the labor market situation.”

Liberal leader Guido Westerwelle called Mr. Clement the “minister of unemployed.”

Nationwide opinion polls have shown the Social Democrats and their Greens allies both slipping in recent weeks. Hard evidence of a downturn came in February, when the Social Democrats fell behind the conservative Christian Democrats in an election in the northern state of Schleswig-Holstein and is likely to hold on to power there only in cooperation with a small local party.

In North Rhine-Westphalia, Germany’s most populous state with 17 million residents, opinion polls put Mr. Schroeder’s alliance of Social Democrats and Greens neck and neck with the opposition conservatives and liberal Free Democrats.

Losing that state, a Social Democrat stronghold for decades, would send a strong signal that Mr. Schroeder is heading for defeat in the general election expected in September 2006.

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