Unemployment Rains On Schröder's Parade

The unemployment figures for June are likely to come as an unpleasant surprise for the campaign of incumbent chancellor candidate Gerhard Schröder and his Social Democratic Party.

According to the Federal Labor Office (BfA) in Nuremberg, unemployment increased last month by 7,900 compared to May to 3.95 million. The unemployment rate remained unchanged at 9.5 percent.

The rise in absolute numbers is unusual. In the past three years, unemployment in this period has tended to dip - by an average of 50,000 - due to seasonal factors, like the availability of temporary summer jobs.

The news from Nuremberg is anything but good for German Chancellor Gerhard Schröder. With federal elections scheduled for September 22, unemployment has become a key issue in the campaign battle with the opposition Christian Democrats (CDU) and its Bavarian sister party, the Christian Social Union (CSU).

Schröder said the country’s unemployment problems were not homemade. "I think we know that the positive tendencies in the world economy have not reached the labor market yet," he said. The Federal Labor Office expects an improvement in the fourth quarter of 2002.

Serious problems in eastern Germany

The Labor Office said the June rise was concentrated in the former East German states.

Whereas the number of unemployed in June fell by 900 to 2.56 million in western Germany, it increased by 8,900 to 1.39 million in eastern Germany. This resulted in an unemployment rate of 17.8 percent in the five former East German states, more than double the western states' 7.6 percent.

Schröder has announced "tailor-made recommendations" to reform the eastern German labor market. He said there was growth in trade and industry there, but great difficulties in the construction sector.

The federal government was therefore "very strongly" emphasizing commercial industry, as well as research and development, he added.

Unemployment could decide the election

The CDU and CSU are only too willing to remind Schröder, whose party is trailing the conservatives in opinion polls, of the promises he made during the 1998 election campaign. At that time, he said he would cut unemployment to 3.5 million by 2002 and that if he failed, he would not deserve to be re-elected.

In an attempt to appease his critics, Schröder has endorsed the first proposals made by the government-appointed Hartz Commission to slash Germany's high unemployment rate.

Volkswagen personnel director and board member Peter Hartz, who heads the commission, has said the key to cutting the lines at the employment office lies in speeding up unemployment registration, increasing temporary work opportunities, boosting tax incentives for self-employment and encouraging greater labor mobility.

Hartz claims the commission's ideas, due to be formally presented in mid-August, could cut unemployment by two million in the next three years.

Eastern German politicians, however, have sharply criticized the Hartz proposals. Saxony-Anhalt’s premier Wolfgang Böhmer called the recommendations "unsuitable" for the region. His counterpart in Mecklenburg-Western Pomerania, Harald Ringstorff, has demanded an "eastern component" to the commission’s suggestions.

The leaders say eastern Germany faces different problems than the west. Saxony’s premier, Georg Mildbradt, said speeding up the placement of unemployed will not solve the region’s problems.

The actual difficulty was the extreme dearth of available jobs, he said, a result of the economic collapse after German reunification in 1990. Unemployed persons could not be placed in positions that do not even exist.

Böhmer also criticized the encouragement of greater labor mobility. "A further exodus would be harmful for the development of the East," he said.