Schroeder's popularity has waned since September's elections

The proposals are designed to reduce the country's chronically high unemployment and stimulate the country's moribund economy as recession looms.

Many SPD members felt the package, which will cut spending on unemployment benefit, pensions and health care, as well as making it easier to fire people, betrayed the party's principles and accused Chancellor Schroeder of seeking to dismantle the welfare state.

But ahead of the vote, in an impassioned appeal lasting nearly an hour, the SPD leader warned his party that failure to tackle the country's current economic woes would re-open the electoral door to the opposition Christian Democrats, ousted from power five years ago.

"If we don't do it," he said, "it will be done by others who do not share our values."

Hurdles remain

Some 90% of the 524 delegates attending the meeting in Berlin backed the proposals, but Mr Schroeder still needs to win approval from his party in a parliamentary vote later this year.

The vote took place as hundreds of union activists and students, who are calling for a new wealth and inheritance tax as a means of tackling the public deficit, protested outside.

Mr Schroeder announced the reform package in March.

After winning last September's elections by a narrow margin, support for his party has waned dramatically as unemployment has risen to new heights and the economy worsens.