Schroder faces tough task in pacifying party

When Germany's Chancellor Gerhard Schroder returns to work today after a three-week holiday, he will face the formidable task of pacifying a squabbling party, putting his beleaguered government back on track and boosting his own flagging popularity.

While the Chancellor has been enjoying the sun in Tuscany, his colleagues in the Social Democratic Party (SPD) have been fighting a bitter ideological battle in public - while Mr Schroder's personal popularity has tumbled to an all-time low.

"This summer's theatricals were unwelcome and they will now cease. They are damaging for both the government and the party," he said.

Left-wing members of the SPD are unhappy with the government's recent budget plan, which offers tax cuts to business but cuts spending on social welfare and pensions. Regional leaders such as the Prime Minister of the Saar, Mr Reinhard Klimmt, and Brandenburg's Mr Manfred Stolpe complain that the spending plans represent a shift away from the SPD's left-wing roots.

The left-wing members received support from the party's powerful general secretary, Mr Ottmar Schreiner, but the Chancellor insisted yesterday that there would be no change in his government's policy.

"We are on the right course with our savings and reform packages," he said, adding that Germany's economy could grow by as much as 3 per cent next year.

Signs of economic recovery represent Mr Schroder's best hope of fulfilling his most important campaign promise - to cut Germany's dole queues. The Chancellor's much-trumpeted Alliance for Jobs has yet to yield any significant results and business leaders remain sceptical of the government's commitment to reforming Germany's economy.

But figures released last week suggest that business confidence has improved dramatically in recent months and, as Asia's battered economies recover, German exporters are looking forward to a bumper year. Tax cuts for businesses are designed to encourage job creation while lower taxes for employees encourage consumers to spend more in the shops.

Mr Schroder's most pressing task is to assert his authority over the SPD and over party activists who mistrust his flirtation with Mr Tony Blair's pro-business economic policies. The Chancellor became chairman of the party in the wake of Mr Oskar Lafontaine's surprise resignation from all political offices earlier this year but he admitted yesterday that he has neglected the role.

"On account of the demands of the EU presidency and the war in Kosovo, I have had too little time to make an impact inside the SPD. That will change. During the next few months I will take an intense interest in the party," he said.

Mr Schroder faces five state elections before the end of the year and, if the government's popularity does not improve, the SPD is likely to lose power in at least two states. Such a development would make the government's job more difficult. The Chancellor's popularity has fallen sharply in recent weeks and the Foreign Minister and Green leader, Mr Joschka Fischer, is Germany's most popular politician, followed by the Defence Minister, Mr Rudolf Scharping.

Mr Scharping recently turned down the job of NATO Secretary General, saying he preferred to stay in domestic politics. Outwardly supportive of the Chancellor, Mr Scharping has been careful to retain cordial relations with both wings of the SPD and few political observers believe that he has yet achieved the summit of his ambitions.

A sign of Mr Schroder's growing sense of embattlement came last week when he cancelled all interviews with the commercial TV station RTL in protest against a planned satirical series about the Chancellor and his wife called How was I, Doris?