The German Chancellor, Mr Gerhard Schr÷der, has admitted it is unlikely he will achieve his goal of cutting unemployment to below 3.5 million before next year's election. In an interview to be published today, Mr Schr÷der also revised down German growth estimates from 2 per cent to just 1.5 per cent, the second downward revision so far this year, something that is likely to fuel fears of a major economic slowdown.

Positive news came yesterday from the federal statistics office, which revised the consumer price index for July to 2.6 per cent, down from 2.7 per cent. The revision, down to lower fuel prices, will come as a relief to government and business who are expected to face pressure for above-inflation wage demands.

Falling inflation in Germany will also increase the likelihood of an interest rate cut from the European Central Bank when it returns after its summer break.

In the face of growing evidence of an economic slowdown in Germany, Mr Schr÷der said his government was not to blame for economic problems abroad. Leading economic institutes have already revised down their growth estimates to between one and 1.8 per cent and one German Bandstand board member believes growth will be close to zero in the second half of the year , according to the newspaper, Die Welt.

Opposition parties have accused the government of inaction on slowing growth and rising unemployment.

Mr Schr÷der ruled out any one-off measures, saying he would not abandon reducing the national debt to "finance any programme that will burden our children and their children".