The chancellor summoned Economics and Labor Minister Wolfgang Clement and Finance Minister Hans Eichel back from their vacations for a meeting with other top leaders from the Social Democrats and coalition partner the Greens.

The crisis session, which was not officially dubbed as such, followed growing opposition to the reforms among the German public.

Earlier this week tens of thousands of people across the former East Germany took to the streets to protest the government's plans.

Economics Minister Wolfgang Clement emerged from Wednesday's meeting apparently satisfied with the outcome of the talks, and reiterating the necessity of the overhaul.

"The process of reform must continue," he told reporters. "It's important for Germany's economic development."

Aiming to please

However, in an effort to placate the protesting public, Schröder and his ministers have come up with some minor concessions.

Clement now proposes that the controversial unemployment aid 'Arbeitslosengeld II' be paid out at the beginning of January next year, which means that all recipients will receive 12 payments in 2005 - an amendment which will reportedly cost the state €800 million ($981 million).

He also made concessions on how much money can be paid into savings accounts belonging to children of the unemployed before jobless benefits are reduced. He told reporters that he had proposed the introduction of a €4,100 ($5,024) allowance for children from birth onwards rather than from the age of 15.

Clement was at pains to stress that the employment market reforms were not going to plunge anyone into poverty or create unacceptable living conditions. He added that this week's protests had neither weakened his, nor the government's position, underlining again that reforms were no more or less than that which is necessary.

Enough for the former East?

But it remains to be seen whether his comments and concessions will stem the flow of agitation amongst protesters in the eastern states, who have vowed to rally every Monday until the reforms are abandoned,.

Unemployment in the former East averages 18.5 percent, which is more than double that in western Germany, and residents there would be hardest hit by the planned cutback in social welfare payments.

Eastern Germany has been plagued by high unemployment since reunification with the former West Germany in 1990 as unprofitable former state-run enterprises were closed down in the former communist state.