Giving in to demands from the grassroots of his Social Democratic party (SPD), German Chancellor Gerhard Schröder agreed to hold a party congress on June 1 after meeting with the SPD leadership in Berlin. Effectively turning the event into a vote of confidence, SPD General Secretary Olaf Scholz said the reforms would be voted upon as a complete package at the congress.

“We believe there is now a situation where it has to be made clear that the SPD stands behind the reform agenda and supports the policies of the chancellor,” Scholz told journalists on Monday.

Schröder announced a package of sweeping reforms last month in an attempt to revive flagging German growth and shore up the country’s creaky social security system, but his “Agenda 2010” plan has encountered massive criticism from unions and the left-wing faction of the SPD. At the heart of the reforms are proposals to cap unemployment benefits at 12 months and make it easier for small firms to hire and fire new workers.

Storm of protest

The government’s plans are likely to face a storm of protest at the congress, as the party’s hard-left members take the opportunity to attack proposals they say would irreparably damage the German welfare state. The Greens, Schröder’s junior coalition partner, face opposition from its own regional chapters over the reforms and has scheduled its own party congress on June 14.

Andrea Nahles, the leader of the SPD leftwing members of parliament said on Monday he expected the government to back away from its reform agenda at the congress.

“I expect movement. If there isn’t, we’ll head towards a confrontation,” Nahles told the Reuters news agency in an interview.

Despite the resistance from within the government’s own ranks, Schröder appears committed to his reform course. After scraping to victory in last September’s general election, he has staked his political survival on pushing through the unpopular measures.

Economy grinds to a halt

In recent years, Europe’s largest economy has ground to a halt under the weight of its generous welfare system and constricting labor market policies. Economic growth slowed to only 0.2 percent in 2002, its lowest annual rate since a recession in 1993, and German unemployment is running at a five-year high of 11 percent.

Rainer Brüderle, the deputy chief of the opposition liberal Free Democrats, said the decision to have the SPD congress showed the party would have difficult forcing the reforms through.

“The SPD leadership suffered a crashing defeat. It no longer has its own shop under control,” said Brüderle.

Unfortunately for Schröder, even if he faces down his own revolting backbenchers and regional SPD chapters at the party congress, Germany’s trade unions have announced major demonstrations against the chancellor’s reform plans starting May 1.

A traditional SPD constituency, the unions argue relaxing job protection rules won’t create new jobs and are instead calling on the government to spend more on public works projects to spur the economy.