The German chancellor, Mr Gerhard Schröder, yesterday presented sweeping proposals to reform the rigid employment market and to halve dole queues in three years, writes Derek Scally, in Berlin.

But presentation of the proposals, seen as Mr Schröder's last chance to turn around his dimming re-election prospects, was overshadowed by the flooding in eastern Germany.

"We are all challenged to help cut unemployment, something that is the result of society's indifference," said Mr Peter Hartz, the personnel manager of Volkswagen and head of the commission that prepared the report.

Mr Schröder said he hoped to "make this great work a reality" and called on Germans to embrace a "new spirit of unity... to realise a new order on the employment market".

The 344-page document calls for a shake-up of the federal employment office, widely seen as an overly-bureaucratic behemoth that hinders rather than helps job-seekers find work.

It puts forward measures to reduce the time taken to place candidates and calls for an end to restrictions on the operations of private employment agencies.

Mr Hartz said the commission's proposals will cut the average time between jobs from 33 to 22 weeks, saving the government €19.5 billion a year in unemployment benefits.

To achieve this, the report calls for financial incentives for companies who take on employees and higher tax-free allowances for the self-employed to discourage black-market jobs and foster what it called a "Me Plc" entrepreneur culture.

However, the report watered down its most controversial proposal, for across-the-board dole cuts for people who refuse work. Another proposal dropped would have granted a tax amnesty on money hidden in foreign bank accounts if it was invested in eastern German industry.

"The report combines innovation with social justice," said Mr Walter Riester, the labour minister yesterday.

The cabinet will debate the proposals next week, but with elections next month, has no time to implement the proposals.

The 15-member commission came together in February to reform the federal employment office, the Arbeitsamt, after staff admitted they massaged data to improve their placement rates.

But rising unemployment in recent months widened the commission's brief, and the final report was billed by the government as a catch-all recipe to reverse decades of neglect.

If implemented in full, as Mr Schröder promised yesterday, the Hartz report could be a watershed in German labour politics. It would open the way to part-time work and temporary jobs, viewed with suspicion by German employees and with horror by the unions.

Mr Schröder called on German society and his political opponents to accept the report, just as it was accepted unanimously by the commission's members, which included union and employer representatives.

But employers' organisations gave the report a cautious, if unenthusiastic, welcome yesterday.

"It skirted over all matters that would make the employment market more flexible and would create more jobs," said Mr Hans Werner Busch, head of the organisation for steel-industry employers, Gesamtmetall.

Opposition parties dismissed the proposals as too little too late and boycotted the presentation of the report, calling it "an election stunt". "The report is a document of the government's failure," said Ms Angela Merkel, leader of the Christian Democrats (CDU). She said that if elected next month, the conservatives would implement their own proposals.

Rising unemployment is uppermost in the minds of German voters with just over a month to election day.

Mr Schröder has a task ahead of him to convince the electorate that, after promising to reduce unemployment to 3.5 million at the last election, these new, untested proposals will work. Conservatives hope to convince voters that their recipe of tax-cuts and reduced bureaucracy will cut dole queues faster.