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05-07-2003, 07:02 PM
European Economies: German April Unemployment Rises
By Rainer Buergin
Berlin, May 7 (Bloomberg) -- German unemployment rose in April to the highest in more than five years, adding to pressure on Chancellor Gerhard Schroeder to reduce wage costs, ease labor market laws and defy the unions that helped him win reelection.
The jobless rate climbed to 10.7 percent from 10.6 percent in March as Europe's largest economy skirts recession. The number of unemployed rose by a seasonally adjusted 44,000 to 4.46 million, the Federal Labor Office said, the highest since 1997 and more than the population of Berlin and Cologne combined.
``What we need is a true easing of costs,'' said Frank Gebert, chief executive of Alno AG, a maker of fitted kitchens based near Stuttgart that has shed a quarter of its 2,000 jobs since the start of 2002. ``The government must take measures to boost the economy quickly.''
The German economy has barely grown since shrinking in the last two quarters of 2001. Orders to manufacturers fell 3.9 percent in March, led by a drop in domestic demand for goods such as machinery, a report today showed. Siemens AG and Deutsche Bank AG are between them shedding about 50,000 jobs.
Unions are enlisting the support of members of Schroeder's party in their campaign against his plans to cut jobless benefits and make firing easier. Schroeder has suggested he may resign should his Social Democrats withhold support for the proposals.
Most Germans are skeptical about Schroeder's ability to push through his plans, opinion polls show. Sixty-four percent of 1,300 interviewees said they expect him to fail in his efforts to loosen employment laws and cut welfare benefits, a poll by market researcher Usurna showed last week.
Earnings Worsen
The yield on the German 4 1/2 percent bond maturing in January 2013 fell 10 basis points to 3.98 percent at 3:57 p.m. in Frankfurt, the lowest since March 14. A basis point is 0.01 percentage point.
The euro fell 0.58 U.S. cents, or 0.5 percent, to $1.138. German stocks also declined, with the benchmark DAX index shedding 1.8 percent, or 55.02, to 3011.93 at 3:59 p.m.
The March decline in manufacturing orders was the second biggest in more than seven years. Orders from German customers plunged 5.6 percent and export orders fell 2 percent.
Siemens, Deutsche Bank and Volkswagen AG reported worsening results for the first quarter. Volkswagen said today net income fell 68 percent as sales in Germany, the company's biggest market, fell 5.6 percent.
Siemens, which is shedding more than 35,000 jobs, said it may cut costs further because of ``weakness'' in orders for machines and tools.
Schroeder Struggles
German business confidence fell to the lowest level in 16 months in April, suggesting the economy will struggle to expand after stagnating in the final quarter of last year. International organizations, including the International Monetary Fund, predict the German economy will grow half a percent or less this year.
``Executives have become disillusioned'' about the government, said Volker Nitsch, an economist at Bankgesellschaft Berlin. ``They want action. There won't be any improvement in unemployment before the end of the year.''
As the economy stagnates and unemployment rises, Schroeder's Social Democrats may struggle to hold on to power in the state of Bremen, which they have ruled since World War II, in regional elections on May 25.
Schroeder's proposals are threatened with defeat in parliament amid a growing number of dissenters within the party. He has scheduled a congress with the SPD rank-and-file on June 1.
Dissenters
About 20 of the 251 lower-house lawmakers from Schroeder's SPD and at least eight Green Party legislators oppose plans to cut jobless benefits and shorten entitlement to jobless payouts, the Bild-Zeitung newspaper reported. Schroeder can afford no more than four dissenters in the coalition in a parliamentary vote.
He also plans to encourage small companies to hire more workers by reducing protection from dismissal. Under the current system, about 90 percent of Germans who are fired challenge their employer's decision in court, according to the BDA employers' association.
``Rules protecting workers against dismissal -- as well as red tape -- are the main reason why companies aren't creating more jobs,'' said Stephan Goetzl, head of the Bavarian metals and engineering employers' associations BayME and VBM. ``Unless the unions ease off the brake pedal we can forget any improvement in unemployment -- even next year.''
Credit Rating
Germany risks losing its AAA debt rating, the highest, should Schroeder fail to secure the majorities needed to push through his proposals, said Kai Stukenbrock, an analyst at Standard & Poor's, in a statement yesterday. German ``growth prospects are among the weakest in the rating category,'' he said.
``The current state of the labor market makes clear that the reforms we are striving for are necessary,'' Economics Minister Wolfgang Clement said in a statement.
Adjusted for European Union standards, Germany's jobless rate in March was 8.9 percent, above the average of 8.7 percent for the dozen countries sharing the euro. The U.S. jobless rate rose to tie an eight-year high of 6 percent in April.
Consumer spending, which accounts for more than half of Germany's $2-trillion economy, is declining. Retail sales fell 3 percent in March, the biggest drop in 3 1/2 years, the Federal Statistics Office said.
Exports May Slow
Exports, which account for about a third of German gross domestic product, may weaken as growth in the dozen-nation euro economy stalls. European manufacturing unexpectedly shrank in April for the seventh time in eight months, a survey of purchasing managers for Reuters Group Plc showed.
The number of people out of work in western Germany, which accounts for 94 percent of national output, rose a seasonally adjusted 30,000 to 2.81 million, compared to 2.78 million in March, the Labor Office said.
The number of people out of work in eastern Germany rose 14,000 to 1.65 million, from 1.64 million the previous month.
Last Updated: May 7, 2003 10:17 EDT
By Rainer Buergin
Berlin, May 7 (Bloomberg) -- German unemployment rose in April to the highest in more than five years, adding to pressure on Chancellor Gerhard Schroeder to reduce wage costs, ease labor market laws and defy the unions that helped him win reelection.
The jobless rate climbed to 10.7 percent from 10.6 percent in March as Europe's largest economy skirts recession. The number of unemployed rose by a seasonally adjusted 44,000 to 4.46 million, the Federal Labor Office said, the highest since 1997 and more than the population of Berlin and Cologne combined.
``What we need is a true easing of costs,'' said Frank Gebert, chief executive of Alno AG, a maker of fitted kitchens based near Stuttgart that has shed a quarter of its 2,000 jobs since the start of 2002. ``The government must take measures to boost the economy quickly.''
The German economy has barely grown since shrinking in the last two quarters of 2001. Orders to manufacturers fell 3.9 percent in March, led by a drop in domestic demand for goods such as machinery, a report today showed. Siemens AG and Deutsche Bank AG are between them shedding about 50,000 jobs.
Unions are enlisting the support of members of Schroeder's party in their campaign against his plans to cut jobless benefits and make firing easier. Schroeder has suggested he may resign should his Social Democrats withhold support for the proposals.
Most Germans are skeptical about Schroeder's ability to push through his plans, opinion polls show. Sixty-four percent of 1,300 interviewees said they expect him to fail in his efforts to loosen employment laws and cut welfare benefits, a poll by market researcher Usurna showed last week.
Earnings Worsen
The yield on the German 4 1/2 percent bond maturing in January 2013 fell 10 basis points to 3.98 percent at 3:57 p.m. in Frankfurt, the lowest since March 14. A basis point is 0.01 percentage point.
The euro fell 0.58 U.S. cents, or 0.5 percent, to $1.138. German stocks also declined, with the benchmark DAX index shedding 1.8 percent, or 55.02, to 3011.93 at 3:59 p.m.
The March decline in manufacturing orders was the second biggest in more than seven years. Orders from German customers plunged 5.6 percent and export orders fell 2 percent.
Siemens, Deutsche Bank and Volkswagen AG reported worsening results for the first quarter. Volkswagen said today net income fell 68 percent as sales in Germany, the company's biggest market, fell 5.6 percent.
Siemens, which is shedding more than 35,000 jobs, said it may cut costs further because of ``weakness'' in orders for machines and tools.
Schroeder Struggles
German business confidence fell to the lowest level in 16 months in April, suggesting the economy will struggle to expand after stagnating in the final quarter of last year. International organizations, including the International Monetary Fund, predict the German economy will grow half a percent or less this year.
``Executives have become disillusioned'' about the government, said Volker Nitsch, an economist at Bankgesellschaft Berlin. ``They want action. There won't be any improvement in unemployment before the end of the year.''
As the economy stagnates and unemployment rises, Schroeder's Social Democrats may struggle to hold on to power in the state of Bremen, which they have ruled since World War II, in regional elections on May 25.
Schroeder's proposals are threatened with defeat in parliament amid a growing number of dissenters within the party. He has scheduled a congress with the SPD rank-and-file on June 1.
Dissenters
About 20 of the 251 lower-house lawmakers from Schroeder's SPD and at least eight Green Party legislators oppose plans to cut jobless benefits and shorten entitlement to jobless payouts, the Bild-Zeitung newspaper reported. Schroeder can afford no more than four dissenters in the coalition in a parliamentary vote.
He also plans to encourage small companies to hire more workers by reducing protection from dismissal. Under the current system, about 90 percent of Germans who are fired challenge their employer's decision in court, according to the BDA employers' association.
``Rules protecting workers against dismissal -- as well as red tape -- are the main reason why companies aren't creating more jobs,'' said Stephan Goetzl, head of the Bavarian metals and engineering employers' associations BayME and VBM. ``Unless the unions ease off the brake pedal we can forget any improvement in unemployment -- even next year.''
Credit Rating
Germany risks losing its AAA debt rating, the highest, should Schroeder fail to secure the majorities needed to push through his proposals, said Kai Stukenbrock, an analyst at Standard & Poor's, in a statement yesterday. German ``growth prospects are among the weakest in the rating category,'' he said.
``The current state of the labor market makes clear that the reforms we are striving for are necessary,'' Economics Minister Wolfgang Clement said in a statement.
Adjusted for European Union standards, Germany's jobless rate in March was 8.9 percent, above the average of 8.7 percent for the dozen countries sharing the euro. The U.S. jobless rate rose to tie an eight-year high of 6 percent in April.
Consumer spending, which accounts for more than half of Germany's $2-trillion economy, is declining. Retail sales fell 3 percent in March, the biggest drop in 3 1/2 years, the Federal Statistics Office said.
Exports May Slow
Exports, which account for about a third of German gross domestic product, may weaken as growth in the dozen-nation euro economy stalls. European manufacturing unexpectedly shrank in April for the seventh time in eight months, a survey of purchasing managers for Reuters Group Plc showed.
The number of people out of work in western Germany, which accounts for 94 percent of national output, rose a seasonally adjusted 30,000 to 2.81 million, compared to 2.78 million in March, the Labor Office said.
The number of people out of work in eastern Germany rose 14,000 to 1.65 million, from 1.64 million the previous month.
Last Updated: May 7, 2003 10:17 EDT