German Joblessness - Highest Since Hitler - Rattles Europe

It's carnival time here in the Rhineland. And with so many people running around wearing harlequin costumes and funny hats and face paint, it's hard to tell that Germany is in the grips of its worst unemployment crisis since 1933.

January jobless figures released last week were even worse than expected: 4.66 million Germans are out of work, or 12.2 percent of the work force.

More people are unemployed in Germany than live in a number of other European countries: Norway or Ireland, for instance. Factor in a couple of million "discouraged workers" - those not working but not registered as unemployed either - and the army of German jobless is larger than the entire population of Finland or Slovakia.

Germany - and specifically Chancellor Helmut Kohl - has been the leading advocate for the European Union's top goal, namely the launch of a common currency. If Germany is in such poor economic shape that it cannot meet the criteria it insisted on for the new money, this will be a blow to the cause of unity and to German credibility.

The rest of Europe will feel it if Germany, long the engine of European integration, is derailed. Germany is an important market for goods and a source of investment.

And Germany is simply not in great shape. Modest growth continues, but the phenomenon of a "jobless recovery" is evident: Economic expansion is not creating more jobs. High payouts of unemployment benefits are likely to send the budget deficit soaring too high to meet the criteria the European Union has set for monetary union.

Unemployment figures are likely to improve as the weather warms, but for now Germany is facing its highest unemployment since 1933.

Yes, that's right. The year Adolf Hitler came to power.

But unlike France and Austria, where far-right politicians exploiting fears of economic uncertainty seem to be gaining irresistibly, Germany has seen no great surge to the right.

German politicians are being faulted, however, for their inability to resolve the unemployment crisis.

Rudolf Scharping, parliamentary leader of the opposition Social Democrats, has called the joblessness "a threat to democracy." And both Mr. Scharping's party and Mr. Kohl's conservative-center coalition government have come under widespread criticism for "cluelessness" as to how to solve the problem.

It did not just happen; it's been brewing for well over a year. And although each successive release of new record-high figures has unleashed a blast of criticism and hand-wringing, there has been no real consensus program put into action to fight it: reducing tax burdens, cutting the cost of job creation, or whatever. It has taken all of Kohl's powers of persuasion to get even a relatively modest package of reforms passed.

Hans Peter Stihl, of chain-saw fame, head of the German trade and industry federation DIHT, has predicted no job growth until overall economic growth hits 3 percent. And that's not expected any time soon. Estimates for 1997 growth have been revised downward from 2.5 percent to 2 percent.

"The government doesn't have much room for maneuver," says Adrian Ottnad, senior economist at the Institute for Economic and Social Research in Bonn. "There are no easy solutions for these problems." Moreover, "the public awareness" that action is needed just isn't there yet, he says.

But "the politicians haven't done their homework yet" in looking into reform of the pension and health-insurance systems, he adds.

Jochen Thies, a political commentator in Berlin, paints a gloomy picture: "The new thing is an economic crisis that for the first time since World War II is affecting the middle class ... I have the feeling that the problems that have been isolated in eastern Germany are now spreading across the country."

Since reunification in 1990, many eastern Germans have been jobless, supported only by the social-safety net. Now many western Germans are beginning to feel themselves shut out from the world of work, Dr. Thies adds.

Four months ago, Kohl hit a political high point when he passed Konrad Adenauer to become Germany's longest-serving chancellor. Now he appears vulnerable. The term "post-Kohl era" appears in print occasionally.

Meanwhile, the carnival goes on. This is either Germany's postwar "stability" writ large - the ability to absorb the kind of economic shocks that shattered the prewar Weimar Republic - or denial.

The rest of the world has noticed, though. At the meeting of the Group of Seven major industrialized countries over the weekend in Berlin, Kohl's ministers endured the chastisements of their counterparts: We expect you to make changes, reforms in your economy, greater flexibility in your labor markets.

Two fundamental questions underlie the German - and European - experience right now:

* How much of their cherished social benefits and living standards can Europeans maintain in the face of global economic competition?

* What will the European Union really be: just an economic union or a cultural and political union, too?

Is the European Union just an economic fitness club, where members spar with each other to prepare for taking on Asian tigers and other competitors? One theory is that currency union is now the substitute for the vaguely desired but never quite articulated "political union."

Chancellor Kohl has drawn snickers for his insistence that the common currency is a "matter of war and peace in the 21st century." But he remembers when his homeland was mostly rubble after World War II. For him, the economic unity a common currency would confer is ultimately a political idea - a way to ensure that the nations of Europe do not learn war anymore.