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BERLIN (AP) _ The head of Germany's labor office will leave the post after the agency vastly overestimated its success in helping the unemployed find new jobs, Labor Minister Walter Riester said Thursday.

The affair, which has simmered since an official report earlier this month accused the Federal Labor Office of overstating its success in placing people in new jobs, has proved an embarrassment to Chancellor Gerhard Schroeder's government in its election-year battle against stubbornly high jobless figures.

Riester said Thursday that the office must be thoroughly reformed _ ``but not with its current president,'' Bernhard Jagoda, a member of the conservative opposition Christian Democrats who has headed the Nuremberg-based agency since 1993.

Riester rejected demands from opposition lawmakers that he resign over the affair, and said a ``quick but fair solution'' was being sought to secure Jagoda's departure.

The minister ordered an inquiry into procedures at the country's unemployment offices after a Federal Audit Office report Feb. 4 found that the systematic use of wrongly entered statistics allowed the employment offices to claim a vastly inflated rate of success.

That report coincided with the release of figures that showed the national jobless rate surged to 10.4 percent from 9.6 percent in December, with the total number out of work rising jumping to 4.29 million.

Chancellor Gerhard Schroeder's conservative rival in Sept. 22 elections, Bavarian governor Edmund Stoiber, has pledged to focus his campaign firmly on the government's economic record.