Schroeder thinks people will understand the need for reform

The chancellor said the labour market reforms would be introduced "according to plan and without any changes".

The new measures, due to take effect on 1 January 2005, would lower long-term unemployment benefits.

Over the past two weeks, thousands of people across the country have taken to the streets in protest.

On Monday, police said more than 20,000 protested in Leipzig in eastern Germany and 15,000 in Berlin.

The government made concessions last week on the timing of the first payments, but has insisted there would be no more fine-tuning of the "Hartz IV" legislation.

Long-term unemployment benefits are to be reduced to the level of social welfare payments, meaning a large cut in income for many families.

Savings

The government says the changes are necessary to revive competitiveness in the German economy.

Speaking to reporters on Wednesday, Mr Schroeder said it was "the biggest social reform in the history of the Federal Republic".

"Of course people are worried about it, but we are firmly convinced that in the end, people will understand that it is important and necessary for Germany's future stability," he said.

As part of the reform package, the unemployed would be required to use family savings and life insurance policies to support themselves.

The government has rejected comparisons between the recent protests and demonstrations in the former East Germany in 1989 that helped to bring down the Berlin Wall.

Unemployment in eastern Germany is 18.5%, twice the level of that in many western German regions.