German president urges bold action on unemployment

BERLIN, May 22 (Reuters) Calling mass unemployment a threat to German society, President Horst Koehler urged the government today to take bolder steps to create jobs, including trimming labour costs and slashing bureaucracy.

Speaking at the start of a week-long conference of the Federation of German Unions (DGB), Koehler said he saw no signs the country was winning its fight against joblessness -- the self-described top priority of Chancellor Angela Merkel's coalition government.

''Mass unemployment is hitting us hard. Increasingly, it is dividing our society and it is using up enormous resources,'' Koehler said, advocating a political ''fast track'' for jobs.

German unemployment is hovering above 11 percent, down from over 12 per cent last year, but still one of the highest rates in the European Union. In the former communist east, nearly one in five adults is without a job.

A former managing director of the International Monetary Fund (IMF), Koehler was appointed two years ago with Merkel's support and has vowed to ''tell Germans the truth'' about the need to reform the economy.

While his powers in the largely ceremonial post are limited, he has already demonstrated a desire to shape the national debate and has not shied away from controversial topics.

In March of last year, he took the government of former Chancellor Gerhard Schroeder to task for not going beyond its ''Agenda 2010'' welfare reforms.

In his speech today, Koehler took care not to criticise Merkel's ''grand coalition'' of conservatives and centre-left Social Democrats (SPD) too sharply.

But he listed four policy challenges for the government: cutting non-wage labour costs; allowing workers to switch from job to job more easily; cutting bureaucracy; and investing in education, research and development.

And in a gentle jibe at the government's fiscal plans, Koehler questioned whether revenues from a massive tax rise approved by Germany's lower house of parliament last week were being properly used.

''After the decision by the Bundestag on Friday, I would have wished the additional tax revenues be used mainly to reduce payroll costs,'' Koehler said.

Merkel's government plans to use only a third of the tax funds to cut labour costs, with the remaining two-thirds going towards consolidating a budget which has violated European Union deficit limits for four straight years.

Koehler's comments came as new surveys showed Germans increasingly sceptical about the work of Merkel's government.

A TNS Infratest poll for German magazine Der Spiegel showed 66 per cent of the country dissatisfied with the coalition's performance, up from 39 per cent in January.

Another survey for public television station ZDF showed on Friday that only 47 per cent of Germans now believe the government can solve the country's economic problems, down from 61 per cent in November.

REUTERS PG RN1710