German job market not prepared for long downturn - Labour Office

BERLIN Sat Jan 12, 2013 10:11pm GMT

People are reflected in a window with the labour office sign at an unemployment center in Munich January 29, 2009. REUTERS/Michaela Rehle

People are reflected in a window with the labour office sign at an unemployment center in Munich January 29, 2009.

Credit: Reuters/Michaela Rehle

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BERLIN (Reuters) - Germany's so far robust labour market is not sufficiently prepared for a deep recession but unemployment should not rise above three million on average this year, Labour Office chief Frank-Juergen Weise was quoted as saying on Saturday.

Even as expectations grow that Europe's largest economy shrank at the end of last year, government subsidies, temporary measures and a shortage of qualified labour still make widespread layoffs unlikely.

Germany's jobless rate was steady at 6.9 percent in December, with 2.942 million out of work and economists expect little change to that trend as long as the euro zone crisis and global economic outlook do not worsen significantly.

Still, Weise said it would be a difficult year.

"The labour market would withstand a deep recession for a year at most," Weise told the magazine.

"The high reserves of the Labour Office are gone and after the contribution payments were lowered in 2012, we did not have the opportunity to rebuild significant new reserves."

Years of wage restraint and structural reforms undertaken in the mid-2000s have put the labour market on a robust footing, especially compared to peers in Europe, such as in Spain, where unemployment hit a record 25 percent in the third quarter of last year.

Kurzarbeit, a government-subsidised short-time work scheme that was used widely during the global financial crisis, for instance gave Germany the flexibility to emerge from its recession in early 2009 more quickly than others.

Weise said the Labour Office expected an average 100,000 employees to be affected by Kurzarbeit in 2013 but was prepared for 180,000, or almost three times the number in 2012, setting aside a budget of 600 million euros for this purpose.

At the height of the 2009 recession, some 1.7 million people were under the scheme and some firms like Opel, the German unit of U.S. automaker General Motors (GM.N), and steelmaker ThyssenKrupp (TKAG.DE), have already said they are returning to the scheme.

(Reporting by Annika Breidthardt; editing by Patrick Graham)

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