Unemployment figures raise Schröder's election hopes

Unemployment in Germany last month fell for the first time since May, giving chancellor Gerhard Schröder a modest boost as he entered the final phase of a campaign which has been dominated by the issue of jobs.

Even the seasonally adjusted figure did not rise as much as expected. But both figures remained above the psychologically crucial four million mark, and are like to be a thorn in Mr Schröder 's side until polling day on September 22.

What is more, an important reason for unemployment being rather better than expected was because of work caused by the floods that have affected Germany, particularly in the east.

Florian Gerster, the head of the government's labour office, said its placement services had quickly expanded job promotion schemes to help repair the flood damage.

Eastern German unemployment fell by 7,000 on an adjusted basis, while the western total rose by 9,000.

The chancellor came into office four years ago promising to cut unemployment to 3.5m during his term.

"This is the day of truth and failure," his conservative challenger, Edmund Stoiber, told a news conference after the publication of the last unemployment statistics before polling day. "Schröder and his government have no notion of a way out of the jobs misery."

But Mr Stoiber himself got a nasty jolt from yesterday's figures. The Bavarian state governor has been campaigning on his record as a job creator, particularly in the hi-tech sector.

But the worldwide crisis in the sector has prompted a surge in bankruptcies in Bavaria, and yesterday's figures highlighted this.

Though unemployment in the region is still below the national average, it climbed 3.8% last month - the biggest rise seen in any of Germany's 16 states. Indeed, Bavaria was one of only two states where the proportion of the workforce without a job was higher in August than July.

The chancellor, who has blamed poor national figures on the global economic slowdown, said the level of unemployment was "still worrying". But he called the August figures "a sign of hope".

The floods had already given Mr Schröder a leg up, providing him with an opportunity to show decisive leadership - an opportunity he seized adeptly. But, though he has been catching up in the polls, the latest survey showed his Social Democrats still two percentage points adrift of Mr Stoiber's Christian Democrats.

A growing problem for the centre-right is the continuing poor performance of the neo-liberal Free Democrats, Mr Stoiber's likely coalition partners, who had been aiming at an 18% share of the vote. Yesterday's poll, by the Emnid polling institute, showed them getting a mere 8%.

Whichever government emerges from the election, it will be faced with an unenviable economic outlook. The official forecast is for economic growth of just 0.75% this year. Mr Gerster said he did not expect any significant improvement in the job market until 2003.