Schroeder loses two key state elections

CHANCELLOR Gerhard Schroeder’s party suffered a crushing defeat in two German state elections yesterday, reflecting a loss of confidence in his government’s economic course despite broad support for his anti-war stand on Iraq.

The conservative Christian Democrats won 48% of the vote in Schroeder's home state of Lower Saxony, gaining 12 points over the last election five years ago to wrest the statehouse from the Social Democrats.

According to exit poll The Social Democrats were at 33%, down from nearly 48% last time.

In Hesse state, the data showed the Christian Democrats surging to 50% from 39% in 1999, with the Social Democrats down to 27% from 39%.

The boost in support left the Christian Democrats poised to drop a centrist coalition ally and govern the state alone.

Electing the two state legislatures, voters had their first chance since Schroeder’s re-election last year to punish the government for post-election tax hikes, rising unemployment and a stagnant economy and they seized it.

The defeat for the Social Democrats could increase pressure from the opposition and Schroeder’s party for economic reforms, such as loosening the tightly regulated labour market and trimming social welfare benefits