Germany Cuts Unemployment Insurance Contributions

FRANKFURT -(Dow Jones)- German Chancellor Angela Merkel announced Saturday a further cut in workers' unemployment insurance contributions, thanks to the robust economy, to help small and medium-sized companies. "We are going to cut costs weighing on workers more by lowering unemployment contributions to 3.5%" of their salaries from 4.2% currently, Merkel said in an Internet podcast on Saturday. A cut to 3.9% from Jan. 1 was approved by the government in September, but the Social Democrats, coalition partners to Merkel's Christian Democrats, had pressed for 3.5%. Employers as well as employees contribute a proportion of salaries towards unemployment insurance, and lowering this and other non-wage costs for firms will allow small and medium-sized enterprises, or SMEs, "to continue to be the backbone of our economy," Merkel said. The announcement came ahead of a special SME conference Tuesday at which the conservative chancellor was due to give a speech. SMEs account for 40% of German companies' total turnover but make up 99.7% of the country's firms and employ 70% of its workforce, Merkel said. The announcement comes amid other signs of a robust finances in Germany's economy, Europe's largest, with its public health insurance, pensions and unemployment agencies returning to the black last year and the jobless rate falling last month to its lowest level since 1993.