Staying the Course

Schröder stamped out speculations of a cabinet reshuffle or a reversal on his reform policies following his party's poor showing in elections for the European Parliament, as well as regional elections in the eastern state of Thuringia.

"There is no arguing about the bitterness of these results," Schröder said. "But we must pursue our policies because they are objectively necessary."

Final results for the European Parliament elections showed the Social Democratic party (SPD) with 21.5 percent of the vote, its worst postwar performance at a national poll. The party fared little better in Thuringia's regional elections, taking just 14.5 percent of the vote, its third worst postwar result for a regional ballot.

Schröder acknowledged he has antagonized large numbers of voters with his unpopular package of welfare and labor market reforms, known as Agenda 2010.

"Of course it hurts when the support isn't there," Schröder said on Monday before meeting with party leaders to discuss the electoral fiasco. "But it is my firm conviction that this policy is necessary for our country."

Party dissent

But not all SPD party leaders agree. The SPD's head in Germany's most populous state, North Rhine-Westphalia (NRW), has warned his party to cut the speed of reforms. "When everywhere you look reforms are being pushed through without giving people any perspective on how they're going to benefit, then they just become fearful," Harald Schartau told the German business daily, Handelsblatt. "We can't just go on doling out the bitter medicine. Rather, we have to make sure that the remedies are effective."

Schartau said it's now up to the SPD to win back its core supporters. "SPD voters are watching very keenly to see if their interests are being represented in the reforms, and if the resulting policies are socially balanced."

Industry-heavy NRW has traditionally been a stronghold for the SPD, and it's also where the party is pinning its hopes for a significant turnaround to stop its run of defeats. NRW will hold regional elections next May. If the SPD were to lose, the conservatives would then have a two-thirds majority in the upper house of parliament, the Bundesrat, giving them the power to block all government legislation.

Analysts say such a scenario would usher in a period of political paralysis that would last until Germany's next parliamentary elections in 2006.

Regaining trust

Many commentators in the German media doubt Schröder's ability to hold on to the SPD's voters. For his part, Schröder -- who once famously claimed to be the "steady hand" guiding Germany through tough times -- is hoping that his strategy of staying the course will win him support in the end.

The SPD's party chairman, Franz Müntefering, said the party is not suffering from a communication problem, rather a problem of acceptance. "It needs to become clear to people that Agenda 2010 will eventually benefit everyone, not just a few," he said.