Head of German Labor Office Dismissed

The head of Germany’s Federal Labor Agency, appointed by Chancellor Gerhard Schröder less than two years ago to reform the country’s beleaguered employment office, was dismissed Saturday following a series of scandals concerning the awarding of potentially illegal consulting contracts.

Florian Gerster was asked to step down from his position after the agency’s board of directors voted 20 to 1 to remove him, board member Ursula Engelen-Kefer said.

"He will be released early from office after the board withdrew its confidence in him," Economy Minister Clement told a hastily convened news conference Saturday afternoon.

A blow to Schröder’s reform plans?

Since taking office, Gerster has frequently made the headlines, initially for his efforts to reform the giant labor administration and then more often for the scandals surrounding him personally.

Gerster, a member of Chancellor Schröder’s Social Democrats, took over the Nuremberg-based agency in March 2002 after auditors concluded that the labor office regularly inflated claims of helping Germans find work. He replaced Bernhard Jagoda, a member of the conservative opposition, who had held the post for nine years.

His departure comes at an inopportune time for the government as it turns its efforts on reshaping the labor office to concentrate more aggresively on job placement rather than administration. The re-focusing is part of a package of reforms pushed through by Schröder last year in an effort to kickstart the German economy by combating skyrocketing unemployment.

Scandal detracts from job

Last year, Gerster hit the news when media and opposition politicians criticized him for approving €2.6 million ($3.3 million) for refurbishing agency manager’s offices. In November, he denied any wrongdoing in awarding a public relations firm a €1.3 million contract without first holding a public tender. He explained the impropriety by saying the consulting services were urgently needed to get out the message about the planned labor office reforms.

In recent weeks, German media reported on a series of alleged irregularities relating to other contracts Gerster approved without holding a proper offering. Reports published this week in the Handelsblatt and Munich-based Süddeutsche Zeitung referred to at least three potentially illegal consulting contracts.

They included a €1.66 million contract with IBM and prominent Munich-based business consultant Roland Berger, who was a member of the government commission which came up with the idea for the recent reorganization of the employment agency.

Since mid-week, Gerster’s supporters in the SPD-government began turning away from him one after another until even Clement, whose ministry oversees labor issues, began to doubt Gerster’s ability to focus on the job at hand. On Saturday, the minister was forced to accept that the head of the labor office would lose his job.

"Florian Gerster had, in a difficult economic period, taken on one of the most challenging reform tasks and had made good progress. The far reaching modernization of this administration with over 90,000 employees is a huge challenge," Clement said regretting the vote of no-confidence.

Gerster’s successor is expected to be named in the next four weeks.