Kai Carstensen, economy expert at the Munich Ifo economics institute told Bild.de news website says he expects up to 700,000 job losses during 2009 – a clear increase from previous estimates of around 500,000.

“Many companies are already starting shorter working days. But we expect a sudden increase in unemployment from the summer,” he said.

He said a third of companies were looking to reduce the number of employees.

The German Institute for Economics called for a slackening of rules governing employment to get rid of the minimum employment time.

He said an increase in unemployment could be expected because employers would not feel confident enough to renew current contracts, which run for a minimum of two years.

They would be more likely to take more people on, or renew contracts, if they were more flexible.

He said, “A more liberal law would help us. But I do not see any willingness among the lawmakers to really do this.”

The federal employment agency is expecting a continued increase in newly-jobless people looking for work.

A spokeswoman told theEuro am Sonntag newspaper, “The trend from January is likely to continue in February and March.”