* Germany took in more than 1 million migrants last year

* Merkel's cabinet has approved an integration law

* But integration classes face lack of teachers and spaces

* Schools and migrants say courses not up to the task

By Michelle Martin

BERLIN, May 25 (Reuters) - In an east Berlin classroom, a group of migrants is taking a "Living in Germany" practice test.

From a list of holidays that includes Easter, Christmas and Labour Day, they must identify which ones are Christian; they must determine whether foods like white sausage, pizza and doner kebabs are German or foreign; and they must pick out the types of insurance they need here.

For many of Germany's new arrivals, numbering more than 1 million last year, a new law will mean that attendance at such classes will determine whether they get full access to the state benefits they hope will launch them on new lives in the country.

Germany took in far more migrants than any other EU country. The success or failure of its integration drive could be crucial in dealing with Europe's biggest migrant crisis since World War Two, which has strained security and social systems and bolstered support for anti-immigration parties.

The German cabinet approved the integration law on Wednesday, with Chancellor Angela Merkel calling it a "milestone". It will mean adult migrants with no job and a high chance of being able to remain in the country can be required to each attend 600 hours of German-language teaching as well as 100 hours of cultural "orientation" that end with the "Living in Germany" test.

Still, the integration drive faces significant hurdles.

Several education experts, teachers and migrants told Reuters that there were not enough spaces in the language classes, or teachers. Some schools said the level of German taught fell short of what many employers expected from skilled workers.

Some migrants and teachers also said the orientation courses, while useful in parts, were not enough to bridge cultural divides.

Mohamad, a Syrian refugee working as an intern in a tax firm, has benefited from cultural course modules such as a guide to German payslips and tax deductions and history lessons about the Nazi era and the former Communist East.

But the 28-year-old, who arrived in late 2014, said he had to wait until October 2015 to start language classes and that he suffered from what he called "language shock".

"I wish I had been given the chance to start learning German earlier. For 10 months I was doing nothing," he said. "If I had been able to put that time to use, my German would be much better now."

For Germany, the stakes are high. Merkel's decision last year to open the door to record numbers of refugees could rejuvenate an ageing workforce. But the longer it takes for them to learn the language and gain qualifications, the greater the strain on the economy and society.

Disenchantment with the chancellor's "Wilkommenskultur" - welcome culture - has helped propel the anti-immigration Alternative for Germany to strong results in regional elections this year.

Those migrants who are required to attend the classes but fail to turn up will see their state benefits cut to a minimum level "that ensures their livelihood", according to the draft law. Labour Minister Andrea Nahles said the amount by which benefits would be cut would depend on the individual case.

Asylum seekers get up to 354 euros ($395) per month during their first 15 months in Germany and up to 404 euros after that or as soon as they are recognised as being entitled to asylum. They also get their accommodation and heating paid for while they are applying for asylum.

That compares with the average gross monthly salary of full-time workers in Germany of 3,612 euros.

STAFF SHORTAGE

There is deep agitation among many Germans about the consequences of the influx, which has evoked memories of the arrival of millions of foreign workers, mainly Turks, who helped rebuild the country after World War Two. Little effort was made to integrate them, and some ended up in ghettos that some Germans say stoked inter-community tensions.

President Joachim Gauck, who rarely intervenes in politics, has warned of the dangers of the current integration drive failing. "We risk frustration and boredom turning into violence and crime, or political and religious extremism flourishing," he said last month.

Germany has been running integration courses since 2005 and until November last year - when asylum seekers from Syria, Iran, Iraq and Eritrea were given the right to take them - many participants were migrants from other EU countries who came in search of work, a spokeswoman for Germany's Federal Office for Migration and Refugees (BAMF) said.

BAMF head Frank-Juergen Weise acknowledges the delays to starting integration courses. His office receives around 2,500 applications per day from eligible asylum seekers to join courses for which there is currently a waiting list of up to eight weeks. But he said that the BAMF was making more places available for migrants.

Part of the problem is that schools are struggling to find enough staff. Schools represented by the German Adult Education Association (DVV), which provide 40 percent of integration courses, cannot meet demand due to a shortfall of about 5,000 teachers, spokeswoman Simone Kaucher said.

Even when a refugee has secured a place, the challenges can be huge.

Jens-Uwe Schaefer, headmaster of east Berlin's Institute for Intercultural Communication (IIK), said migrants might struggle to learn a profession or complete an apprenticeship with the level of German taught in integration classes.

Ludger Woessmann, an education expert at the Ifo institute, said many young adults had missed out on schooling due to spending long periods in refugee camps or travelling.

For some migrants, what they learn in classes also seems far removed from their daily reality of living in mass shelters.

Ihab Ahmad, a 37-year-old who worked as a financial manager in Syria, said the integration classes were giving him good German skills, but that it was hard to put them into practice in his shelter at Berlin's disused Tempelhof airport.

"It's really difficult to integrate or learn when you're in this place because people talk Arabic or their own language," he said.

UPHILL BATTLE

The orientation course currently runs for 60 hours but will rise to 100 under the new law, which must still be approved by parliament. The classes have highlighted the culture shock facing some migrants.

Ralf Sydlik, a teacher at the IIK, said 60 hours was only enough to brush over topics so the increase would help to explain some aspects of German life in more detail, but it was hard to come up with a duration suitable for all migrants.

"Of course 100 hours is still not enough to teach people everything but it's a good start," he said.

His lessons range from topics including public holidays, food and the voting system to Germany's mostly liberal social norms.

"Can men be in a relationship with men in Germany and women with women?" he asked his students. Out of a class of eight, only one answered "yes".

The DVV's Kaucher said regular attendance at courses was also a problem for many migrants, who often have lots of appointments such as with immigration authorities and doctors.

Some suffer from trauma or illness, while others drop out when they find work, she added.

The government's migration office has no illusions that the new arrivals face an uphill battle, with BAMF's Weise predicting that half would still be out of work in five years' time.

And every month migrants wait will reduce the chances of them ever integrating successfully, said Herbert Bruecker, a migration expert at the IAB Institute for Employment Research.

"People who are out of work for a long time become fearful, lose motivation and become less attractive in the workplace," he said. "That's true of refugees too."

($1 = 0.8965 euros) (Additional reporting by Ameenah Sawwan in Berlin and Georgina Prodhan in Frankfurt; Editing by Mark John and Pravin Char)