German Chancellor Gerhard Schroeder said today signs of a consumer confidence recovery showed his labour market and welfare reforms were finally bearing fruit.
"People have recognised that (reform) is a necessity if we want to keep living in a prosperous, socially fair country in the future," Mr Schroeder, who has been battered in opinion polls over the reforms, told the Financial Times in an interview.
"Altogether, I do not think we should be too worried (about the economy). Our expectation of 1.5 to 2 per cent growth for this year is realistic."
Mr Schroeder said he remained concerned about the weak dollar hurting German exporters, but a rebound in household sentiment reported by the GfK research institute on Tuesday should put these concerns into perspective.
He dismissed suggestions he had been weakened by handing the chairmanship of his restless, demoralised centre-left Social Democrats (SPD) to a far more popular ally, Mr Franz Muentefering, amid growing grassroots fury over his welfare cuts.
"I must accept some people see it this way," he said.
"But I think you could only talk about a weakening of the political strength of government and coalition if it came to substantial differences between the designated party chairman and myself. It is pointless to speculate about as it will not come to such differences."
Since January a public outcry over higher doctors' fees and planned pension cuts, part of Mr Schroeder's "Agenda 2010" reform programme, has seriously troubled the SPD.
Landslide state election defeats last year, the prospect of further routs this year and the worst opinion poll ratings on record - around 25 per cent - have tarnished Mr Schroeder's image as a vote-winner, his main hold on the party.
Analysts say he may not survive until the 2006 general election if he loses the 14 state, local and European elections this year, starting with a vote in Hamburg on February 29th.