Schröder rules out resignation after crushing defeats

A defiant Gerhard Schröderrefused to resign as German Chancellor yesterday after a historic election defeat for his party called into question his political future.

With the Social Democrats routed in regional elections in Lower Saxony and Hesse at the weekend, Mr Schröder admitted: "Yesterday the SPD experienced one of its bitterest defeats. At least the bitterest which I have experienced in my political career.

"The government and I have to carry the central responsibility for this defeat. I have to carry this responsibility and I naturally will do this."

Asked if he was considering resigning, Mr Schröder said: "I'm not thinking of that and neither is anyone else."

The consensus was that Chancellor Schröder's days were numbered after his party lost power in his home state of Lower Saxony for the first time in 13 years and suffered its worst post-war defeat in Hesse, at the hands of the opposition conservatives. "Is it the end for Schröder?" asked the mass- circulation Bild newspaper. Der Tagesspiegel newspaper in Berlin said: "There is intense speculation within the Berlin coalition government. Is this Chancellor still able to carry out his job?"

Both regional election results were interpreted as a measure of German voters' frustration with the policies of Mr Schröder's coalition of Social Democrats and Greens since it was re-elected to power with a narrow majority in September's general election.

Mr Schröder accepted blame for the defeat, but added: "We will continue our work with more vigour, anything else would be fleeing a situation which is difficult but solvable, and that was never my style."

Senior Social Democrats conceded the drubbing was a disaster. "There is no doubt that these results are a catastrophe for the Social Democrats," said Wolfgang Clement, Mr Schröder's "superminister" for Economics and Employment.

The party's loss of power in Lower Saxony left the opposition conservatives with an increased majority in the upper house, the Bundesrat, meaning that the government will find it almost impossible to pursue its reforms without conservative support. Angela Merkel, the Christian Democrat leader, made clear that Mr Schröder's government could count on conservative support only if its reforms were business-friendly and did not involve further tax increases.

Commentators noted that he alone bore responsibility for his party's dismal performance and suggested that he might be replaced by his de facto deputy, Mr Clement.

Left-wingers in the party claimed the reforms adopted by the government so far undermined Social Democrat principles. "The government is practising neo-liberalism wrapped in red cotton wool," said Oskar Lafontaine, a former finance minister. Mr Lafontaine, who resigned after a turbulent spell in office, is Mr Schröder's arch- rival. Opinion polls now put public support for "Red Oskar" to return to mainstream politics at 30 per cent.

The rout is likely to provoke a struggle between left-wingers and moderates in the SPD, which will determine whether the economy can be reformed.