Schröder is Germany's Least Wanted

They are too hard-up to afford haircuts and have to do it themselves. Most days they stay at home eating cheap liver sausage and watching television. They don't go away on holiday but sit on their balconies instead.

Welcome to Wittstock, a small, strangely empty town in what was once communist East Germany. With unemployment at nearly 25 per cent, it is here, against a bleak winter landscape of pine forests, that popular frustration with Chancellor Gerhard Schröder - so strong that it now threatens to sweep away his tottering centre-left government - has found its focus.

Schröder will address the annual conference of his Social Democratic Party (SPD) tomorrow with opinion polls showing that he is now the most unpopular German leader in history.

In Wittstock, meanwhile, six unemployed locals have just recorded a CD in which they express the popular frustration with Schröder and the increasingly disliked euro.

The comic song's foot-stomping chorus line, addressed to all German politicians, can be loosely translated as: 'You can piss off.' It has already been featured by Bild Zeitung, Germany's answer to the Sun, and pundits expect it to be a massive hit.

Sitting in a Wittstock bar above the tiny recording studio where the song was mixed, the band's founder, Holly Berger, said: 'People round here simply don't have any money. The shops are empty. The town is dead.

'We understand that problems go back to reunification, but Schröder has the wrong idea. His cuts are directed at the small man. He should begin at the top.

'Being unemployed in Germany isn't much fun. My car is 13 years old. I can't afford a new one. All we can buy from the supermarket is sausage, bread and margarine. We're merely existing.'

Berger receives €283 (£197) a month in unemployment benefit, plus his rent. He is incensed about Agenda 2010, the Chancellor's project to revitalise the lacklustre German economy.

Earlier this month Schröder managed to persuade his reluctant party to approve benefit cuts for Germany's 4.2 million unemployed, including most of Berger's band. The radical structural reforms also include a pensions freeze for the elderly and a shake-up of Germany's traditionally generous health system, as well as tax cuts next year.

Most Germans accept that change is necessary but these reforms are proving deeply, savagely unpopular. Two weeks ago, thousands of people demonstrated in Berlin against Schröder's attack on the welfare state. The SPD's opinion poll ratings have sunk to 25 per cent. Even the party faithful, gathering today in the pleasant Ruhr town of Bochum, believe there is virtually no chance of Schröder winning the next election in 2006.

'When the Communists were in power here, everybody had a job and every mother had a kindergarten place for her child,' Tom Drücker, another jobless band member, said. 'Obviously we can travel now and are free to express our opinions, but the social balance has been upturned.'

In Wittstock, two hours' drive north of Berlin, and in numerous other former East German towns, most local industries have gone bust. Soon after reunification 14 years ago, Wittstock's textile, steel and wood firms collapsed. Few new firms have moved in. The high street is full of vacant shops; the market is almost deserted. Some 4,000 young people have gone to west Germany in search of work. Many of those who stayed behind have either lost interest in politics or started supporting the neo-Nazis. In regional elections three weeks ago only 45 per cent turned out; the local far-right candidate got 700 votes and won a seat.

Germany's right-wing Christian Democratic Union opposition (CDU) is also committed to reforming the traditionally generous welfare state. While the party now enjoys a commanding lead in the opinion polls, few voters, it seems, believe things would be better under a CDU government. The party also has problems of its own: leader Angela Merkel, who has been compared with Margaret Thatcher, has faced weeks of embarrassment after one of her backbench MPs made a rabidly anti-Semitic speech. On Friday the CDU reluctantly voted to kick him out.

Some commentators believe that Germany's misfortunes have been exaggerated, not least by British pundits luxuriating in a reversal of fortunes that now sees the German economy, Europe's largest, in trouble while Britain is still doing comparatively well. But British schadenfreude can be taken too far: though Germany has had three years of low economic growth, it recently emerged as the world's largest exporter, beating even the United States. Unlike the British, the Germans still make things.

The band members - who call themselves the Drückeberger, which means the Shirkers - admit Germany is still an affluent country, but Berger complains: 'The problem is that the gap between rich and poor in Germany is getting bigger. We unemployed find ourselves in a consumer society but we don't have any money.'

Those on the Left who still support Schröder are pinning their hopes on Germany's rapid return to prosperity once the reforms have gone through. They point out that Schröder came from behind during Germany's general election last year to a victory which few expected.

'The voters are scared and confused, but there is no alternative to reform,' said Peter Danckert, the SPD's regional leader in Brandenburg, the state which includes Wittstock. 'We have to do it. The Chancellor is still popular. He is the right guy for us.'

Next month the SPD is producing a small red pamphlet explaining Agenda 2010 to a sceptical public. Germany's ruling red-green coalition has already launched a series of glossy posters promoting its reforms under the bland slogan: 'Germany is moving'.

Many Germans, meanwhile, appear to blame the country's woes on the euro, introduced without a vote. All of Germany's major parties supported the euro, but two years on it remains unloved.

The Drückeberger believe that if ordinary Germans had been allowed a referendum they would - like the Danes and Swedes - have voted to hang on to their old currency.

'There is no doubt prices have gone up, but if you criticise the euro you get told off for being unEuropean,' Berger complained. 'The British have done the right thing. They haven't taken the euro. I have to admit that Tony Blair is right.'