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Last Updated: Friday, 18 March 2005, 15:35 GMT
Schroeder in battle for jobs
By Tristana Moore
BBC News, Berlin

German Chancellor Gerhard Schroeder has outlined key measures he intends to take to address the country's severe unemployment.

Unemployed waiting at German employment office
Five million people are out of work in Germany
Addressing parliament on Thursday, Chancellor Schroeder announced a package designed to stimulate growth and create jobs in Europe's largest economy.

The measures include plans to reduce corporate taxes, from 25% to 19%, and a proposal to invest more money in the country's transport infrastructure.

On the same day, he held a "jobs summit" with opposition leaders in Berlin.

The German chancellor is well aware of the fact that many companies are shifting production to countries in eastern Europe, where corporate taxes and labour costs are lower.

Mr Schroeder told German MPs that he hoped the measures would be financed by closing tax loopholes and reducing subsidies.

But most of Mr Schroeder's speech was devoted to defending his reforms of the labour market, known as "Agenda 2010", which were first introduced two years ago.

The German chancellor needs the support of the opposition conservatives to get his measures passed through the upper house of parliament.

Record unemployment

In a sign of the trouble that may lie ahead, Angela Merkel, the leader of the opposition Christian Democrats, attacked the proposals, saying they did not go far enough.

"The measures are all well and good," she said. "But it was clear that Mr Schroeder did not get to the heart of what Germany needs."

 German Chancellor Gerhard Schroeder addresses the Bundestag
Mr Schroeder's reforms need support from the opposition

The conservative parties are pushing for more structural reforms of the German economy.

There are now more than 5.2m Germans out of work - and the unemployment rate in many areas of eastern Germany is more than 20%.

Sylvia Aldorf, 35, has been unemployed for more than four years. She used to have a job as a paramedic in Cologne, but when she moved to Berlin she could not find any work.

Despite completing many training courses over the last few years, so far she has had no luck.

I met her in Berlin's Prenzlauer Berg district.

"I've applied for lots of jobs, and different kinds of jobs as well - in the medical service, administration, health service, but there's no chance," she told me.


"It's very frustrating because you write dozens of job applications and you never get an answer. Sometimes, but only occasionally, I receive an answer, but more often than not, my application seems to disappear."

"This figure of more than 5m unemployed in this country is very high," says Professor Michael Tolksdorf, from the Berlin School of Economics.

Unemployed takes number at Berlin employment office
Unemployment figures reach 20% in parts of former Eastern Germany
"The last time in history that we had such an enormous figure was in the early 1930s, the Great Depression, and I simply thought that this was atrocious for our country."

Business leaders are equally frustrated with the slow pace of reform.

"We've been hesitating for too long," said Dieter Hundt, the president of the German Employers' Federation.

"The government started off in the right direction, but now it's necessary to continue these efforts. We need a reduction of additional salary costs and we have to reduce the huge amount of bureaucracy facing companies."

With the latest opinion polls showing that the ruling Social Democrat-Green coalition is lagging behind the opposition conservatives, Chancellor Schroeder is under pressure to act.

On 22 May, he faces a crucial state election in North Rhine Westphalia - the heartland of his Social Democrats. It is an election which Mr Schroeder cannot afford to lose.

How unemployment is taking its toll on Germany

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