Mr Schroeder says recovery has already begun

The fall was slight, down to 4.26 million - or 10.2% of the workforce - from 4.34 million in May, but well below the peak of more than 4.7 million at the beginning of this year.

Chancellor Gerhard Schroeder has staked his political career on fighting unemployment, which has rocketed to one of the highest rates in Europe in recent years.

But Mr Schroeder's many critics argue that the government has not deregulated Germany's economy with sufficient zeal.

Germany's high taxes and extensive red tape, many business leaders argue, deter companies from setting up shop there.

Reforms kick in?

According to the Federal Labour Office, June's modest fall was a sign that government reforms are already starting to have an effect.

"The surprisingly strong decline in seasonally-adjusted unemployment is attributable to increased measures to activate the jobless and to the effect of the two labour market reform laws," Labour Office chairman Florian Gerster said.

Mr Schroeder's government has attempted to make life less comfortable for those on unemployment benefit, and has moved to beef up the country's job centres.

Many economists argue, however, that it is still too early to confirm that reforms are starting to bite.

One worrying sign in June's figures was the fact that the overall number of Germans in work also fell, an indication that prolonged economic gloom has persuaded many to quit the workforce, possibly for the long term.

Much of the decrease in unemployment, meanwhile, can be accounted for by adjustments to the way the figures are calculated.