More than one in ten Germans are out of work

The number of people out of work fell 18,000 to a seasonally adjusted 4.363 million or 10.5% of the workforce.

The slide, which was better than many had expected, could strengthen hopes that Germany is inching out of its recession.

But economists warned the fall was the result of labour reforms introduced by Chancellor Gerhard Schroeder, rather than renewed growth.

And despite the seasonally adjusted figure, the raw number of people without work rose by 32,000 thanks to the cold winter weather, and the number of people in work fell slightly.

Stubborn problem

High unemployment rates - widespread across the country but especially acute in the less wealthy east - have dogged Germany for some years.

Ahead of October 2002's general elections, Mr Schroeder had promised to get the jobless rate down to below 4 million.

His failure to do so amid swelling budget deficits and economic stagnation might have cost him the election were it not for his opposition to the US-led threats against Iraq.

But last month he managed to persuade parliament to back a controversial set of labour market reforms, including pension and benefit cuts.

Nevertheless, in the absence of signs of serious growth, some economists said the only thing that might make a serious difference was a cut in Germany's high social security contributions.

"According to our calculations, a 10 percentage point cut in the employers' contribution rate would lead to 1.7 million new jobs," wrote Andreas Rees of HVB Group in a note to clients.

"In our opinion, this would be a silver bullet for reducing unemployment significantly, and also very quickly."