German unemployment could increase by around one million this year to about four million, the head of the Federal Labor Office said on Sunday.
Frank-Juergen Weise told Deutschlandfunk radio the Labor Office was bracing itself for a contraction in German gross domestic product (GDP) of some two per cent this year. This outcome would be more than twice as bad as Germany’s previous worst pos-twar recession, and Weise noted that some leading analysts believed Europe’s largest economy would shrink by as much as three or four per cent in 2009.
“If you calculate that mechanistically, then things would get really, really bad on the labor market,” he said. “However, the effect of the government’s stimulus measures wouldn’t have been factored into that. In view of this, I’d say we got off to a really good start in 2009. In the worst case scenario (unemployment) could get towards four million; it could also get substantially worse if the economy takes a catastrophic turn,” Weise added.
Leaders in the Chancellor Angela Merkel’s ruling coalition of conservatives and Social Democrats (SPD) are on Monday due to agree a new stimulus plan to boost the economy. This is expected to be worth up to €50 billion ($67 billion) over two years. Merkel is standing for re-election in September but must campaign with the economy in recession and the job market entering a downturn for the first time since she took office.
Many leading firms have scaled back production due to falling demand, and the jobless total rose by more than expected in December. Headline unemployment now stands at 3.1 million.
Separately, Berthold Huber, head of powerful industrial union IG Metall, told the weekend edition of the Berliner Zeitung daily he could support delaying the introduction of a raise for the engineering sector to protect jobs. In November, the union secured two staggered pay rises each worth 2.1% for the 3.6 million workers in the sector.
The first raise is due to take effect in February, with the second earmarked for May, though employers and the union agreed the latter could be delayed for up to seven months. “If necessary...we’ll do it,” Huber said. “But we won’t do it to give shareholders or owners profits in the crisis.” (Reuters)