Quotes of the Day

You've got to hand it to Gerhard Schröder; he really knows how to put on a show. At a campaign rally in Magdeburg in eastern Germany last week, he greeted the crowd with a big thumbs-up sign, gave a pugnacious and impassioned speech about his government's record, then exited to loud applause with his hands clasped over his head like a boxer who's delivered a knockout blow. From this bravura performance, you'd think Schröder and his Social Democratic Party (SPD) were coasting to victory in the Sept. 18 elections. In fact, the SPD trails the Christian Democrats (CDU) and its sister party, the CSU, by 13 points, and virtually every editorialist in Germany has written the Chancellor off.

Is Schröder simply putting a brave—and brazen—face on a lost cause, or does he know something voters don't?

There's little to suggest that Schröder can pull off a third straight election victory. The SPD has clawed back some ground—it notched up one percentage point in the polls, from 29% to 30%—and the Chancellor himself got a Nobel Peace Prize nomination last week for his opposition to the war in Iraq. But none of the other signs are good. The party hasn't been able to capitalize on the CDU's rocky first few weeks of campaigning. Unemployment is still at a record high and a recent uptick in economic growth may have come too late to help. Then there are the problems in his own camp. Even as Schröder battles for votes, members of his Cabinet are openly advocating joining a grand coalition with the CDU, while dissidents in his own party are making plans without him. Not even flash floods in southern Germany—Schröder's deft response to a similar crisis in eastern Germany helped him edge ahead of challenger Edmund Stoiber in 2002—look capable of saving him. "Every well-informed SPD voter knows that they cannot win this election," says Alfons Söllner, a political scientist at the Technical University of Chemnitz in eastern Germany.

Don't tell that to Holger Peters, 24, who was cheering the Chancellor on in Magdeburg. "Schröder has achieved a lot for Germany," he says. "[CDU candidate] Angela Merkel and the others don't have any arguments for improving the situation." Peters even likes the "one-euro jobs" that Schröder introduced last year as part of his controversial economic reforms. Intended to reintegrate long-term unemployed into the labor market, the jobs are structured so that employers pay only ?1 per hour, with the rest of the employee's income covered by unemployment benefits. Skeptics say the system encourages wage dumping but Peters, unemployed for a year until he landed a one-euro job, is an enthusiast. "It gives me a chance to meet up with other people," he says. "And it's given me courage to believe that things will pick up."

Schröder's campaign team hope things will pick up in the final weeks of the campaign, too. Nearly 30% of German voters still say they are undecided, and a televised debate scheduled for Sunday between Merkel and Schröder could help the telegenic Chancellor. Team Schröder also intends to step up its attacks on Merkel, in part by focusing on the CDU's plans for tax and health-care reform, which it says will benefit more affluent Germans and disadvantage poorer ones. "We have to make it clear to voters how unjust the CDU's program is," says Andrea Nahles, a leader of the SPD left wing.

Even if a lot of undecideds start leaning his way, Schröder still has to contend with left-wing dissidents in the SPD. Their opposition to his economic reforms crippled his government, leading him to gamble on early elections in the first place. Germany's new left-wing alliance, the Linksbündnis, is exploiting unhappiness with reform to siphon off crucial support from the SPD. In response, Schröder announced an increase in benefits for the long-term unemployed in eastern Germany and has agreed to a wealth tax on people earning over ?250,000 a year.

Still, it may be too little, too late. Gregor Gysi, co-founder of the Linksbündnis, says the SPD platform will only further weaken workers' rights without strengthening the economy. The Chancellor "is saying farewell in a comfortable sort of way," Gysi, an east German, says. "My impression is that he's relieved that it's coming to an end." Gysi's not alone in that view. Even some of Schröder's most ardent supporters fear that the cheers resounding at his public appearances may be the sound of his last hurrahs.

• Andrew Purvis | Berlin
• German Chancellor Gerhard Schröder campaigns like a winner, but he and his party are still the underdogs