A despondent public, angry left-wingers and disgruntled trade unionists are all threatening to undermine German Chancellor Gerhard Schroeder's efforts to reform the troubled economy this summer. Following a string of regional electoral defeats for Mr Schroeder's Social Democrats (SPD) this year, the party's traditional union allies and others on the left have decided it is time to force the government to backtrack on its so-called 'Agenda 2010', a package of unpopular labour-market reforms and welfare cuts. 'We want to correct the social imbalance and make sure it doesn't get any worse,' Juergen Peters, head of industrial union IG Metall, said last week. 'Just because the SPD says there's no alternative for the unions, we won't allow them to keep moving to the right and taking over conservative policies.' Such rhetoric is already likely to be enough to ruin Mr Schroeder's summer holiday, but if a group of left-wing rebels can help it, Mr Peters and the unions may soon have another political party to work with. Last week, 40 ex-SPD members and low-level union representatives in Berlin formed a group called Labour and Social Justice Election Alternative, which has the sole aim of supplanting the Social Democrats as Germany's leading party on the left. For the moment, union bosses like Mr Peters are more interested in reversing the government's modernising course than ditching organised labour's longstanding ties to the SPD for an upstart party. But the danger for Mr Schroeder, who has vowed to continue with the reforms, is very real, since a divided left would help the conservative opposition. 'Things look pretty bleak right now,' said Gero Neugebauer, an expert on party politics at Berlin's Free University. 'Schroeder can't turn back because it would be political suicide, but his supporters aren't convinced his policies are true to the party's roots.' Mr Schroeder's decision to axe job-protection measures and cut benefits in an effort to combat chronically high unemployment has never sat comfortably with much of the Social Democrats' rank and file. But a disastrous result in state and European Union elections last month encouraged many SPD members to challenge the chancellor more openly.