THE number of people out of work in Germany has risen above five million for the first time since reunification in 1990, the Government is expected to announce today.

The rate of unemployment is likely to exceed 11 per cent, heaping pressure on the Government of Gerhard Schröder, the Chancellor, to speed up the pace of reform to kickstart the country’s faltering economy.

Government ministers said the figures reflected changes in the way unemployment is calculated, adding 200,000 jobless who were previously on welfare benefits as a result of reforms intended to make German business more competitive. In addition, the figures include 350,000 seasonal workers laid off during winter.

But Dirk Niebel, the opposition Free Democrats labour market spokesman, described the figures as “psychologically devastating”. Herr Niebel added that the figures were likely to understate the true rate of unemployment, which he estimated to be between six and seven million.

Germany has embarked on the most radical shake-up of its labour market in decades in an attempt to restore growth to an economy that was once the motor of growth across Europe. The country hovers on the brink of recession, and yesterday two prominent companies, the construction group Walter and Berlin’s 130-year-old Kindl brewery, announced they were to close. The so-called Hartz IV reforms, a cornerstone of the policies of Wolfgang Clement, the Finance Minister, are meant to wean Germans off welfare by cutting benefits and increasing incentives to find a job.

The reforms, which German business considers are long overdue, have been criticised by welfare groups for failing to take into account the lack of opportunity in some parts of Germany, particularly the east. When the labour reforms were introduced on January 3, angry protesters stormed job centres.

Torgelow, a small east German township, lays claim to having the country’s worst jobless rate. One person in three is unemployed and half of those who do have jobs depend on the state-run employment centre for temporary work, such as clearing leaves.

Marlies Hellwig, 50, who is helping to run Clover Leaf, a club for the unemployed in Torgelow, said: “I don’t see that the numbers really matter — 4.5 million or 5.5 million, what’s the difference? The point is that nothing seems to be moving.” Every Monday the Clover Leaf workers — subsidised by the State — gather over-ripe fruit and vegetables and food past its sell-by date from supermarkets and bakers in order to sell them on to the unemployed for a nominal sum. The whole community is deeply in debt: the only prospering business is the debt collector, Rüediger Tabert, who is also a pawn broker. Some 75 per cent of the town’s unemployed have been without a job for well over a year. From this month, their dole has been cut to €331 (about £232).

“There are whole streets here emptied of young people,” said Ingrid Faltinat, 55. The town had 10,000 inhabitants, but 2,000 under the age of 25 have left since 1998, the year that Herr Schröder came to power.

He is confident that unemployment will fall as soon as growth picks up in the spring of 2006, in time for the September election. For the time being the opposition is making hay at the Chancellor’s expense.

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