Germany Extends Program To Curb Unemployment

BERLIN (AP) -- Germany on Wednesday extended until the end of 2010 a program that allows companies to put workers on short work hours in an effort to avoid layoffs -- an arrangement credited with keeping unemployment down over recent months.

A new survey, meanwhile, showed that consumer confidence in Europe's biggest economy is declining amid fears of job losses.

Chancellor Angela Merkel's Cabinet approved a one-year extension of the short-work plan. However, it reduced to 18 months from two years the maximum period over which benefits can be paid.

The benefits cover as much as 67 percent of the income that workers lose by being partially idled.

Many companies have cut hours to avoid axing workers as they scale down production to cope with reduced demand. About 1.4 million people received short-work benefits in this year's second quarter.

Although the German economy has grown in the last two quarters as exports begin to recover, Merkel has warned that the country isn't yet over the crisis. Unemployment is expected to grow next year.

"Securing jobs will remain a challenge in 2010," Labor Minister Franz Josef Jung said in announcing the extension of the short-work program.

"This year, hundreds of thousands of jobs were able to be saved this way and the valuable knowledge of employees secured," Jung said in a statement.

Jung's ministry said the program is expected to cost up to euro5 billion ($7.5 billion) this year.

Germany's unemployment rate stood at 7.7 percent in October, with 3.23 million people registered as jobless.

German business confidence has been rising for months, but Wednesday's survey from the GfK research group found a second consecutive slip in consumer confidence.

The group's forward-looking consumer climate index for December stood at 3.7 points -- down from 4 in November.

"After their continuous upward trend of the past seven months, German economic expectations dropped back down in November, primarily as a result of growing public fears of rising unemployment," GfK said.

"In the wake of this, income expectations also fell," it added. It noted that low energy prices had fueled purchasing power over recent months.

However, consumers' propensity to buy remains stable, and is far above its level at this time last year, GfK said.

That "may well bring a positive surprise in the imminent seasonal Christmas trade, particularly since retailers are enticing consumers with attractive prices," it said.