German Reforms Eat Into Budget

Germany's labour market reforms are making an even bigger hole in the public purse than previously envisaged, figures published by the finance ministry showed on Monday. Under the so-called "Hartz IV" reforms, unemployment and social welfare benefits for the long-term unemployed were merged into one with effect from Jan. 1. And in the period from January to April, around eight billion euros ($10 billion) were paid out in benefits, already more than half of the 14.6 billion euros budgeted for the whole of 2005, the ministry revealed in its latest monthly report. Extrapolated for the year as a whole, the figures suggest that around 10 billion euros more could be paid out in unemployment benefits in 2005 than originally budgeted. A figure of that magnitude would be disastrous for the government's efforts to bring the public deficit back within EU limits. The shortfall would widen to 17.1 billion euros next year and amount to a total 66.8 billion euros for the whole period from 2005 to 2008.