Schröder humiliated as jobless pass 4m

Gerhard Schröder suffered two humiliating setbacks yesterday when German unemployment came in at its highest level for five years and the opposition demanded his government face a fraud inquiry for allegedly lying to voters about the economy.

Gerhard Schröder suffered two humiliating setbacks yesterday when German unemployment came in at its highest level for five years and the opposition demanded his government face a fraud inquiry for allegedly lying to voters about the economy.

Figures released by the Federal Labour office showed the number of jobless had leapt by 96,000 to 4,026 million in November, the highest rate for the month since Mr Schröder was first elected as Chancellor in 1998 on a pledge to halve unemployment.

The grim news was compounded by the government's prediction that unemployment would rise to more than 4.5 million by next spring largely because of increasing labour costs from higher pension and health insurance rates.

Mr Schröder admitted yesterday that Germany's economic position had deteriorated. "There is no doubt that there are economic problems," he said. He reiterated his coalition's line, blaming "global economic causes" and the "negative effects of the Iraq crisis".

The conservative opposition swiftly condemned his remarks. Angela Merkel, the Christian Democrat leader said: "You are a weak leader who is not up to the task and your government stands for inertia and tax burdens. It is incapable of implementing reform." She said her party would seek an unprecedented parliamentary inquiry to establish whether the government had lied to voters on the state of the economy during the general election campaign this year. Such an inquiry requires the support of only 25 per cent of MPs in the Bundestag.

The double blow could hardly have come at a worse time for Mr Schröder, who has deluged the electorate with unpopular tax, insurance and pension increases since his re-election to plug an apparently unexpected £20bn budget deficit. The measures have been calledunworkable by prominent industry representatives, and the such as Dieter Hundt, the head of the German employers' association. The opposition has also alleged that the Chancellor has reneged on a key election promise not to increase taxes.