Economic Growth Drives German Unemployment to Five-year Low

Germany marked the traditional Labour Day celebrations yesterday by announcing that unemployment had fallen below the four million mark for the first time in almost five years.

Employment minister Franz Müntefering said that unemployment had dropped to 3.9million - 7.5% - in April, a fall of 1.1million in two years.

Analysts predict that jobless numbers will continue to fall, due to booming economy. They said it was proof that the Eurozone's biggest economy is on the mend after years of sluggish growth and an unemployment rate which had reached 12%, labelled Germany as the "sick man of Europe". "The growth forecasts and labour market development show a clear trend - unemployment is sinking," Mr Müntefering said.

He said the fall in the number of young people out of work, from 550,000 around two years ago to 400,000 today was particularly welcoming.

Although Chancellor Angela Merkel will be keen to bask in the news, Mr Müntefering, vice chancellor and a member of the Social Democrats (SPD) in the grand coalition government was quick to claim credit for the upswing on behalf of the former Social Democrat chancellor Gerhard Schröder. Mr Schröder introduced a swath of economic and welfare reforms which were - and continue to remain - deeply unpopular.

The unemployment figures come on the back of the economy ministry's raised growth forecast for 2007 of 2.3% from 1.7%. Germany is also the world's export champion, with exports amounting to almost €81bn (£55.3bn) last year.

Consumer spending and business confidence are also on the rise.

However, experts warned employers not to rush ahead with wage increases which could reverse the trend, as politicians and trade union leaders used May Day rallies to push for a minimum wage in certain sectors of industry, and thousands of workers in the electrical, engineering and metal working sectors went on strike demanding more pay.

"Those who work full time must be able to live off their pay," said Kurt Beck, leader of the SPD at a rally in Wörth, western Germany. Michael Sommer, chairman of the DGB labour umbrella body, called for a minimum wage of not less than €7.50 (£5.12) an hour, arguing that social spoils were not being fairly shared and that the "days of wage restraint are over".

The good news has yet to sink in with ordinary Germans however, who over the past five years have turned into bargain-hunting penny pinchers who have welcomed a surge in discount shops.