German Jobless Tally Over 4m

Unemployment in Germany surged to its highest level in more than four years in November, leaving one in 10 workers out of a job.

As Chancellor Gerhard Schröder shrugged off talk of an economic crisis, the renewed evidence of problems in the eurozone's largest economy added to the pressure on the European Central Bank to make a decisive cut in eurozone interest rates when it meets today.

Figures released yesterday showed unemployment rose by a seasonally adjusted 35,000 to 4.16m - the highest since August 1998, just before Mr Schröder's coalition government came to power, promising to cut unemployment to below 3.5m.

Mr Schröder told the Bundestag - Germany's lower house of parliament - that despite the sharp rise the economy was in better shape than some of its competitors.

"This country still has growth and can still hold its head up high in Europe," he said. "Many of our neighbours and many countries in the world envy us the scale of our problems, although I don't want to belittle them."

But Florian Gerster, the head of the government's Labour Office, suggested news from the labour market could get worse before it gets better. "The economy is too weak to reduce unemployment," he said, describing November's jump as "a serious rise, beyond the usual seasonal ups and downs".

A further piece of bad news underlined the state of the German economy yesterday, as official figures showed retail sales unexpectedly fell by 0.7% in October.

The markets are expecting the ECB to cut interest rates by at least a quarter of a percentage point this afternoon.