Chancellor Gerhard Schroeder reiterated the offer on the day set by German and American government negotiators as the deadline for agreeing a settlement.

In an interview on ZDF television in Germany, he said: "The contribution cannot be increased."

But his statement came only hours after the victims' US lawyers and the World Jewish Congress rejected the offer as insufficient.

A concentration camp victim shows her identification tattoo

The latest offer follows months of wrangling between German government and businesses, and US lawyers representing about 1.5m to 2.3m survivors.

About 60 German companies, including Daimler, Chrysler and Volkswagen, agreed last month to double their offer to DM5bn ($2.6bn), with the German government providing the remainding DM3bn ($1.6bn).

But although the survivors also dropped their demands by about half, they are still demanding DM10bn-DM15bn ($5.2bn-$7.8bn).

In the television interview, Mr Schroeder said it was up to the survivors to make the next move.

"It is now up to the lawyers to make concessions," he said. "I hope that this can still happen."

He argued that the money could compensate the victims "rapidly and unbureaucratically", appealing to their lawyers to "heed the possibility of a rapid settlement".

'Whole fund at risk'

Meanwhile, a spokesman for German industry warned that rejection would put the whole compensation fund at risk.

Otto Lambsdorff suggested that some firms are considering pulling out of the fund and making their own, individual settlements with former slave workers.

This could potentially lead to thousands of cases being heard in US courts, and it would also mean that many victims who worked for firms which no longer exist would get nothing.

Lawyers for the survivors have suggested resuming negotiations on 13 December.

But Germany is now looking for an official response from Stuart Eizenstat, the US government's chief negotiator.

It is also waiting to find out whether the US will change its laws to allow compensation cases, currently out of the statute of limitations, to be fought on US soil.

The firms established the fund in February under threat of US class-action lawsuits, and are seeking total legal immunity in exchange for making the payments.

It is possible that more German companies could add to the fund. The American Jewish Committee last week published a list of 225 companies which it believes were involved in using slave labour.

But BBC correspondents say that even if a new offer was accepted, difficult negotiations still lie ahead about how the money should be shared out among the victims who suffered varying degrees of enforced labour.