Employment Minister Franz Müntefering said that the cabinet had agreed to a three-year extension to an original plan made just two years which would exclude citizens from eight of the 10 newest members of the EU, including countries like Poland, Hungary and Slovakia. Only Malta and Cyprus are excluded.

"In view of the situation on the German labor market, the arrival of employees from the new EU countries must continue to be controlled," a labor ministry statement said.

"Germany must guarantee that the access to the German job market remains controlled in the interest of economic stability," Müntefering said in a press conference after the cabinet meeting. "But this does not mean that the German market is insulated."

Germany ignores EU's call for more workers freedom

The EU's executive Commission has called for an end to all barriers to movement of workers, arguing that old EU members who open their labor markets will not face an influx of migrants.

But Germany, which suffers from chronically high unemployment which in February hit 12.2 percent, has dismissed ideas of reform.