SPD Facing State Election Blow

Fourteen months ahead of a general election, Schröder's party risks losing control of Germany's industrial heartland where it has ruled for 39 years. The state of 18.1 million people, the most populous in the country, is set to switch to the conservative Christian Democratic Union, whose leader Angela Merkel is aiming to unseat Schröder next year and become Germany's first female chancellor.

Many observers believe that after a string of poor results in state elections, defeat in North Rhine-Westphalia could hammer one of the last nails into the Social Democratic Party's (SPD) coffin on a federal level. The environmentalist Greens, who form the so-called 'red-green' coalition with the SPD both in the state and on a federal level, are also struggling.

In the seven years since Schröder came to power, a majority of Germany's states have switched to the conservatives. With German unemployment hovering around the five million mark for the first time since World War II, North Rhine-Westphalia accounts for around 1.1 million of the jobless and in some of the most blighted areas the unemployment rate tops 30 percent.

Working-class voters angry

Judging by people gathered for an SPD rally in the industrial city of Wuppertal on Wednesday, Schröder's party has lost the trust of working-class voters, the traditional bedrock of their support.

Labor market reforms introduced in January this year have added to the pain for many and alienated others. Else Koch, 83, said she had supported the SPD ever since she was eligible to vote, but this year she would abstain in protest at their policies.

"They take all my money, my pension is poor and I still have to pay for my medicine," she said.

Andre Kaiser, a 41-year-old caregiver who has been out of work for a year, used to be a member of the SPD but said he had suffered from the party's labor market reforms.

He was thinking of voting for a breakaway left-wing party. "It's a reasonable alternative," he said.

SPD hurt by the economy

The CDU's lead candidate, Jürgen Rüttgers, has sought to hammer home the effects of the weak economy at every opportunity. "Red-green is the coalition of mass unemployment," Rüttgers, an often uncharismatic and blundering politician, said on Tuesday during a US-style head-to-head debate with the state's leader, Peer Steinbrück of the SPD.

There are signs, however, that although the opposition has led the opinion polls for weeks, the SPD may be closing the gap at the last minute. A poll last week showed the CDU would have polled 44 percent against 35 percent for the SPD if the election had taken place last Sunday.

The Greens would have polled nine percent while the CDU's likely partners, the Free Democratic Party (FDP), would have obtained seven percent. That meant the combined CDU/FDP lead over the SPD and Greens was cut to seven percentage points, compared to 10 in previous weeks.

In an attempt to win back its traditional territory, the SPD's chairman Franz Münterfering has launched an attack on 'rampant capitalism', criticizing companies that invest in cheaper labor markets than Germany.

But the Bundesbank on Tuesday said the criticism of the competitive behavior of companies and investors had "sparked fresh uncertainty" and said the government was sending conflicting signals about its willingness to implement much-needed structural reforms in the euro zone's biggest economy.