"Many investors believe the government is completely adrift, wedded to old policies championed by the unions," said Thomas Mayer, chief European economist at Deutsche Bank.
Stifling payroll taxes, which are needed to prop up Germany's health and welfare systems, prompt many people simply to duck out of the official economy, taking black-market jobs that generate no tax revenue.
Schroeder appears determined to try again, with a raft of measures to be announced on March 14.
The European Central Bank gave him a hand last Thursday by lowering interest rates by a quarter of a point. Some economists say rates, while still too high for Germany, are now quite relaxed for other countries. That could spur their demand for German exports.
"People always assume Germany will drag down the rest of Europe," said David Walton, the chief European economist for Goldman Sachs. "It is reasonable to say that Europe could lift up Germany."
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