Germany's unemployment rises

Queues are growing at Germany's social security offices

The number of jobless in Germany unexpectedly rose by 12,000 to 3.99 million in March.

Germany is once more lagging at the end of the train of the European economy

German Banks Association

The rise is the third consecutive increase, confirming that the eurozone's largest economy is slowing.

The US slowdown, bad weather and labour policy are cited as the reasons behind the surprise rise.

"It is clear that the slowdown in economic growth has had an impact on the jobs market," said the president of the Federal Labour Office, Bernhard Jagoda.

Political promises

Last month, Mr Jagoda predicted that unemployment would average between 3.6 million and 3.65 million in Germany in 2001.

And Chancellor Gerhard Schroeder has pledged to bring the number of jobless to below 3.5 million before the next national election in 2002 and below three million by 2005.

The government's aim to cut unemployment to 3.5 million by September 2002 is not far-fetched, though it is an ambitious target

Ralph Solveen
Commerzbank.

The government is sticking to its forecast of 2.75% economic growth this year, despite gloomy expectations to the contrary.

But on Tuesday, the German banks' association cut its growth forecast for Germany to 2.1%

"Germany is once more lagging at the end of the train of the European economy," said the association.

Rate-cut pressure

Signs that the German economy is slowing are putting pressure on the European Central Bank (ECB) to cut interest rates when it meets next week.

Both the International Monetary Fund (IMF) and the major German banks have already urged the ECB to cut rates and boost growth in the eurozone.

Germany is expected to stage a strong economic recovery in the second half of the year, and could bring the labour market back on target.

"Over the year we expect the economy to pick up and this will help the labour market back on its feet.

"In this respect, the government's aim to cut unemployment to 3.5 million by September 2002 is not so far-fetched, though it is an ambitious target," said Ralph Solveen of Commerzbank.