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German labour office boss under fire over contract

BERLIN, Nov 26 (Reuters) - Florian Gerster, the head of Germany's Federal Labour Office, came under mounting pressure on Wednesday over a 1.3 million-euro ($1.53 million) public relations contract that was awarded without inviting tenders.

Opposition lawmakers called for Gerster's resignation, accusing him of extravagance at a time when Chancellor Gerhard Schroeder's ruling coalition of Social Democrats and Greens is moving to trim spending on jobless benefits and increase pressure on the unemployed to take up work.

The Economy and Labour Ministry and automaker Volkswagen AG were forced to deny a newspaper report on Wednesday that said VW personnel director and labour market expert Peter Hartz was set to replace Gerster as labour office chief.

And the Federal Audit Office on Tuesday criticised the way the contract was awarded to Berlin-based media consultant WMP Eurocom and said it would investigate.

"Florian Gerster must step down immediately," said Markus Soeder, general secretary of the conservative opposition Christian Social Union, Bavarian sister party to the CDU.

"He obviously lives on another planet," Soeder added. "It's his job to worry about the unemployed, not about his own image." If Gerster were to depart after a year-and-a-half in the job, it would deal a blow to Schroeder's government, which appointed him in April 2002 to shake up the labour office following accusations of inefficiency and waste.

Germany's biggest-selling newspaper, Bild, asked on Wednesday whether Gerster himself would soon join the ranks of Germany's 4.38 million unemployed. Bild reported that the 54-year-old former labour minister in the state of Rhineland Palatinate, who is a member of Schroeder's SPD party, refuses to take a flat in Nuremberg, where the labour office is based, preferring instead to stay in a luxury hotel.

Gerster earns about 260,000 euros a year, twice as much as his predecessor Bernhard Jagoda, German media have said.

On Tuesday, Gerster said the public relations contract, which was meant to help smooth labour office internal and external communications, was awarded without tenders because of a need for speed. He said the contract process was legal.

It also emerged this week that the labour office is planning a separate advertising campaign worth 25 million euros. "We had to act and we had to act fast," Gerster said in a statement. On Friday, he is due to testify about the contract to the lower house of parliament's economy committee.

According to a report from the Sueddeutsche Zeitung newspaper on Wednesday, WMP chief Bernd Schiphorst was prepared to cancel the labour office contract and would announce its decision sometime during the afternoon.