Schroder braced for mauling at the polls

Next week's return of the German parliament to Berlin was meant to be a celebration of the reunified country's coming of age, …

Next week's return of the German parliament to Berlin was meant to be a celebration of the reunified country's coming of age, and a chance for Chancellor Gerhard Schroder's centre-left government to place its stamp on the Berlin Republic. But as Mr Schroder's Social Democrats (SPD) face possible disaster in two state elections tomorrow, the chancellor is unlikely to have much to smile about at Tuesday's ceremony in Lord Foster's newly restored Reichstag.

Less than a year after his coalition of Social Democrats and Greens swept to power, Mr Schroder is now more unpopular than his predecessor, Dr Helmut Kohl. If a federal election were held tomorrow, opinion polls say the government would be driven out of office.

Tomorrow's state elections are in the southern state of Saar and the eastern state of Brandenburg - both Social Democrat strongholds where the party governs alone. Polls suggest the SPD could lose power in both states - or at least be forced to form coalitions. The prime ministers of both states have been careful to distance themselves from the federal government, particularly from plans to slash public spending by DM30 billion.

Most of the savings will come from cuts in social welfare and linking pensions to inflation rather than wage rises. Forty Social Democrats are threatening to vote against the cuts when they are presented to the Bundestag next month.

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Even if the chancellor persuades the rebels to back his reforms, losses in tomorrow's elections could give the conservative opposition a majority in the upper house of parliament, the Bundesrat. This would enable them to block some of the government's reforms and make Mr Schroder's life much more difficult.

To add to the chancellor's woes, his old rival, Mr Oskar Lafontaine, is getting restless after six months of retirement and is encouraging his allies in the SPD to resist any attempt to change the party's basic programme.

Mr Schroder wants to bring the party into line with his own centrist thinking and to adopt many of the business-friendly policies of Mr Tony Blair's "Third Way". But Mr Lafontaine's supporters pour scorn on the chancellor's calls for the creation of a supply-side economics of the Left.

"That's about as intelligent as demanding `socialism of the Right'. There is no such thing as left-wing neo-liberalism. Whatever comes out of it certainly has nothing to do with a modern Social Democratic age," according to Mr Claus Noe, a former adviser to Mr Lafontaine.

Mr Lafontaine resigned as SPD chairman at the same time as he gave up the job of Finance Minister. His friends now say that once he realised that he could not work with the chancellor, Mr Lafontaine decided that Mr Schroder should take control of the party. His hope has been that the Social Democrat rank and file would woo the chancellor away from his flirtation with Blairism and return him to the true path of the Left.

Mr Lafontaine plans to rub more salt in the chancellor's wounds next month, when his memoir, The Heart Beats on the Left, is launched at the Frankfurt Book Fair. The book is expected to chronicle the breakdown in relations at the heart of Mr Schroder's government and to accuse the chancellor and his allies of dirty tricks.

Left-wingers in the SPD are exultant at the departure from government of the chancellor's chief spin doctor, Mr Bodo Hombach, who is accused of property irregularities. Mr Hombach was, along with Mr Peter Mandelson, of Britain, the driving force behind the Blair/Schroder paper that outlined a common vision for the future of the Left in Europe. The paper upset many of Mr Schroder's party colleagues, not least because of its declaration that nobody could any longer hope to have a job for life. Most Germans work in the same job all their lives and there is little popular appetite for the "brave new world" of labour flexibility and low-wage, service jobs.

"This is neo-liberalism painted pink. This paper conveys the impression that German social democracy only has to adjust itself to the dominant dogma," Mr Noe complains.

Despite his unpopularity and the prospect of defeat in tomorrow's polls, the chancellor still has cause to hope that his fortunes will turn. Germany's economy is recovering and business leaders promise the upturn will soon translate into new jobs - helping Mr Schroder to fulfil his key election promise to cut Germany's dole queues.

Mr Lafontaine's abrupt resignation removed from power the chancellor's most dangerous rival within his party and few Social Democrats would consider moving against Mr Schroder. His coalition partners in the Greens become more docile by the day, so that the outspoken Environment Minister, Mr Juergen Trittin, is now the sole surviving rebel within the government.

The opposition Christian Democrats know they owe recent poll gains to the government's unpopularity, rather than to any public enthusiasm for their own policies. Unable to outflank Mr Schroder on the right over economic policy, some Christian Democrats want to move the fight to the high moral ground by urge more support for traditional family values.

This strategy could prove disastrous in a country where even church-goers show a remarkable tolerance for alternative lifestyle choices. But the coming weeks will be hazardous for Mr Schroder, as tomorrow's elections are followed by four further regional elections, culminating in a state poll in Berlin on October 10th. The chancellor's trump card within his party has long been his reputation as a vote-winner. If the Social Democrats fare as badly as expected in the elections, the ever-charming Mr Schroder could rapidly lose his lustre.