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Germany: Statesmen Link Unemployment To Politics

Prague, 8 July 1998 (RFE/RL) -- Politics and official statistics collided head-on in Germany yesterday when the Federal Labor Office released figures showing that unemployment had declined 0.4 percent in June, the biggest such dip since the country unified in 1990. The collision resulted from sharply different interpretations of the fall in joblessness to (a seasonally adjusted) 4.3 million between the office's chief, Bernhard Jagoda, and conservative Chancellor Helmut Kohl, who is trying to come from behind to win a fifth term in office in general elections in September.

Kohl's government had announced the statistics four days in advance (July 3) in order to win political capital from maximum press coverage. Yesterday the Chancellor told members of his Christian Democrat Party that the nation's economy, in his words, "is beginning to move." He predicted that there would fewer than four million German unemployed by the end of the year.

But later in the day Jagoda told reporters that he could not say that "we are going to break through the four-million level." He attributed the June fall in unemployment not only to renewed economic growth in Germany, but also to greatly increased government spending on so so-called "make-work" job schemes since March. Labor office figures show that the number of people in government-sponsored job programs jumped almost 20 percent in the past three months.

Independent analysts agree that in the past 12 to 18 months Germany's economy, like others in the European Union, has begun slowly to emerge from years of stagnation. But they tend to discount Kohl's assessment of the June figures.

Timo Klein, a senior economist at Standard and Poore's Money Market Services in Frankfurt says that if those now considered employed because of government direct-job support, wage subsidies and training programs are discounted, unemployment in the private sector has actually increased by 80,000 since March. He adds, however that one-third to one-half of those now in government-financed programs are likely to become permanent workers in the near future. Klein calls this "a sideways trend."

"A side-ways trend means that, essentially, the number of unemployed has changed little up to now....if you take away the seasonal factors and...that part of the government measures that are likely to have only a short-term effect. That means that once these measures run out or are reduced, it will lead to a counter-reaction: high(er) employment figures....There is of course quite a discrepancy between west and east (German jobless figures). The cyclical (economic) recovery is certainly helping quite a bit in the west now, with a drop of 10,000 to 20,000 a month in joblessness. But in the east, until now, the (jobless) figures have risen slightly."

German unemployed groups, who regularly protest each month when jobless statistics are announced, are even less impressed by the June figures. After some 50,000 people took part in 300 demonstrations nation-wide yesterday, protest coordinator (Uwe Kantelhardt) told reporters that "talk about improvement is just an election-campaign strategy."

If the skeptics are right, why is that the clear increase in German economic growth, which could reach three percent this year (from under two percent two years ago), has not translated into a real lowering of joblessness? The main reason, say many analysts, is that Germany --like France and other EU members-- must introduce so-called structural economic changes in order to bring about significant reductions. These reforms would, among other things, give more flexibility to its labor market and reduce social charges on employers. Even so, according to EU Employment and Social Affairs Commissioner Padraig Flynn, it will take close to five years before permanent reductions in unemployment can be achieved. The best time to introduce structural changes is immediately following general elections and the installation of a new government. Whether Kohl or his now-favored Social Democrat opponent Gerhard Schroeder is named Chancellor in October, analysts believe such reforms will be in order for the EU's biggest economy. They would help the country's neighbors, too, because Germany's economic health is essential to those of many other European economies, east as well as west, which are linked to it. When Germany catches cold, as the expression goes, much of Europe begins sneezing.