The German cabinet will meet today to finalise unpopular plans for spending and pension reforms in the face of determined opposition from within the Social Democratic Party (SPD), the senior partner in the governing coalition, and its trade union allies.

The cabinet session follows a largely fruitless meeting between Mr Walter Riester, Labour Minister, and trade union leaders in Berlin yesterday, at which the unions called on the government to compromise on its benefits and pension plans. The sharp public divisions within the SPD and among its grassroots supporters have contributed to a steep decline in the party's popularity in opinion polls shortly before four crucial Land (state) elections.

The unions said the proposals by the ruling coalition of SPD and environmentalist Greens to limit the rise in state pensions to the rate of inflation in the next two years and to restrain spending on unemployment benefits were "not acceptable".

The unions' reaction is the second blow to Chancellor Gerhard Schroder, after Mr Reinhard Klimmt, the left-leaning SPD premier of the Saarland, repeated on Monday his opposition to the government's plans. Speaking after a meeting of the SPD's executive committee in Saarbrucken, Mr Klimmt said he would cast his state's upper house vote against the 2000 budget if necessary.