Five Million Germans Jobless

Labor office officials said 5.037 million people were without a job in January -- 537,000 more than in December. While the increase is largely to blame on recent social welfare reform that re-classified welfare recipients as unemployed, there has already been fierce criticism of the government's economic policy.

Opposition members are accusing Chancellor Gerhard Schröder of concealing the real magnitude of the country's unemployment. The news that five million people cannot find work is a serious problem for the chancellor, who took office with the pledge ot intending to drive joblessness below 3.5 million.

In the fight against persistently high unemployment, Schröder is now banking his political fortunes on a government-sponsored low-wage sector that combines one-euro-an-hour wages with welfare benefits. Next year’s general election could then be the chancellor’s moment of truth.

Government blames statistics

But as news about the new figures leaked on Tuesday, Labor Minister Wolfgang Clement was quick to explain the increase.

"The reasons for that are the winter season as well as the fact that job placement activities by our labor office agents were substantially lower last month as a result of sweeping organisational changes," he said. "In addition there is a statistical effect as thousands of former welfare recipients will be counted as unemployed for the first time in the wake of our reforms."

Experts believe that in addition to December’s four and a half million officially registered unemployed, there will be some 350,000 Germans who lost their jobs due to the winter, and an estimated 300,000 people who had previously received social welfare without actually being enrolled at the labor office.

A long-term problem

Franz Müntefering, party leader of the ruling Social Democrats said the figures unveil what has so far been kept under wraps by successive governments -- including those run by the conservatives.

"We are aiming to make a clean breast of things," he said. "We do not want to hide people in welfare statistics but give them a real chance to find employment again."

Germany’s opposition liberals and conservatives, however, accuse the government of fiddling the figures. They claim that in fact more than seven million Germans are unemployed as a result of the government’s failing economic policy.

Labor minister Wolfgang Clement, however, hopes that the government’s social and economic reforms will be able to reduce unemployment by more than 200,000 this year.

Skepticism vs. trend reversal

Some economists, such as Bert Rürup, the new head of the government's economic advisory council, are sceptical and say any positive effects of the reform could be offset by a worsening global economic climate.

"The steep appreciation of the euro hasn’t been stopped," Rürup said, adding that and fears of a war in Iran are bound to provoke oil price hikes. "So I’m rather sceptical about government expectations, especially about a rise in domestic consumption which it says will spur on growth and employment here."

But others warned the government of reacting by trying to come up with short-term remedies. Klaus Zimmermann, the president of the German Institute for Economic Research (DIW), said he expected unemployment figures to drop by the summer.

"That's going to continue to happen in 2006," he told Berliner Zeitung. "This means that the trend has been reversed."