The German government has been criticized by Europe's highest judicial court for labor market legislation that limits the recruitment of Polish workers.

The European Union's (EU) Court of Justice has made public its objection to a rule implemented by Angela Merkel's ruling administration that only German firms or foreign firms with a branch in the country can hire Polish workers.

Germany's Federal Employment Agency also limits the number of workers that can be recruited from ex-communist states and will continue to do so until 2011, the BBC reported.

Specifically, workers from these countries must not be hired in districts where the unemployment rate for the previous six months was at least 30 per cent more than the country's median jobless figure.

In a case brought by the Polish government and the European Commission, the court found that Germany "creates direct discrimination against service providers established in [EU] member states other than Germany which wish to enter into a works contract with a Polish undertaking".

The German unemployment rate declined in December, as the country's economy continued its recovery from the recession.