By Ray Furlong BBC correspondent, Berlin

This is the beginning of the end for German Chancellor Gerhard Schroeder and for his government.

That, at least, is how the German opposition leader Angela Merkel responded to the news that Mr Schroeder was stepping down as leader the Social Democratic Party (SPD).

Schroeder must try to survive his term of office

The chancellor does, however, insist that he will continue as head of the German government.

The fact that his party is lagging way behind the opposition in the opinion polls is one reason there has been growing criticism from the membership and why he is stepping down.

But while his position as head of government may be weakened by this, he can continue.

There have been examples in the past of chancellors who were not party leaders.

Reforms

Some analysts say Mr Schroeder may now lack the strength to do anything more than try to survive the rest of his term office, which ends in 2006.

Others have suggested the party might be more manageable now.

Mr Schroeder was not loved by the rank and file while his successor, Franz Muentefering is more popular.

In this case, Mr Schroeder could continue the controversial economic and social reforms he began last year and hope that an economic revival after three years of stagnation will also rejuvenate his political fortunes.