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Schroeder suffers Hamburg defeat

Many voters have been angered by Schroeder's economic reform drive.

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HAMBURG, Germany (Reuters) -- German Chancellor Gerhard Schroeder's party suffered an election rout in their long-time bastion Hamburg on Sunday amid public anger over welfare cuts, fanning speculation he will slow his reform drive.

It was the Social Democrats' (SPD) fourth big election defeat in a year and marks a disastrous start to 2004, with 14 state, local and European elections.

The party is already demoralized by painful economic reforms many of its members do not support.

According to official preliminary results, the center-left SPD scored just 30.5 percent of the vote compared with the conservative Christian Democrats Union (CDU) on 47.2 percent.

In the last election in 2001, the SPD won 36.5 percent compared with the CDU's 26.2.

The Greens party also increased it share of the vote, gaining 12.3 percent support compared with 8.6 percent in 2001.

The SPD polling is the worst post-World War Two result in the northern port city.

The election was tilted in favor of the CDU by the popularity of charismatic mayor Ole von Beust, who easily outshone his SPD rival Thomas Mirow.

The result adds to speculation Schroeder will water down his reforms to win back voters, and possibly reshuffle his cabinet in Berlin, to gain fresh momentum.

It puts increasing pressure on Schroeder, who has lost his aura as a vote-winner, and coincides with signs that the modest economic upturn seen in recent months is grinding to a halt as the result of the euro's strength.

Further election defeats in 2004 and 2005 will darken his chances in the next general election in 2006 and raise some doubts his coalition of SPD and Greens will survive that long.

Reforms under fire

"The SPD faces a difficult year of elections and has to respond to this. You can't keep on governing against public opinion," said Karl-Rudolf Korte, political scientist at the University of Duisburg-Essen.

"This will dramatically change the pace of reform in this country."

Schroeder's "Agenda 2010" of unemployment benefit cuts -- rules for easier firing and healthcare reforms involving higher charges for visits to doctors is designed to revive Europe's largest economy and cope with the cost of an aging population.

France and Italy plan similar measures.

The outcry in Germany against some of the measures, including a widely hated 10 euro per quarter additional fee for visits to the doctor, has shown how hard it is to revamp Europe's largest economy, whose welfare state has burdened it with some of the highest labor costs in the world.

Franz Muentefering, designated chairman of the SPD since Schroeder quit as its leader in February to mollify the restless party, put a brave face on the result, saying: "We're sure our policies are right and we will continue to implement them for Germany's future."

Most economic think-tanks see the measures as essential to German prosperity. But calls for a change of direction have increased within the SPD this year, with many members saying Schroeder is hurting the poor and favoring the better off.

The SPD held power in Hamburg for 44 years before being forced out in 2001 by a makeshift coalition of the CDU, the liberal Free Democrats and the law-and-order party of maverick former judge Ronald Schill.

Laurenz Meyer, general secretary of the CDU, said: "This is a great start to this marathon election year. This election was about voters wanting a change of direction in this country."

Copyright 2004 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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