by Lorne Cook
BERLIN, Aug 18 (AFP) - Chancellor Gerhard Schroeder returned to work on Wednesday pledging to press ahead with his government's unpopular labour market reforms in the face of growing protests, and committing to help rebuild Iraq.
In a 75-minute press conference in Berlin, Schroeder talked up the eurozone's biggest economy and talked down the opposition for criticising a social reform package they had only recently helped pass through parliament.
Despite tens of thousands of people protesting in the streets of several major cities on Monday, Schroeder said that the labour market measures would be introduced "according to plan and without any changes on January 1, 2005".
The measures will reduce benefits for the long-term jobless to the level of social welfare payments, meaning a large cut in income for many, and require those on the dole to use savings and life insurance to support themselves.
The chancellor made some concessions last week on the package, part of the far-reaching Agenda 2010 social and economic reform programme, to protect the poorest and mollify opponents as the demonstrations grew.
More than 90,000 people hit the streets of several German cities on Monday to protest at the looming cuts, sharply higher than the 40,000 people who took up the call from unions and associations a week earlier.
"People have a natural right to demonstrate," Schroeder acknowledged. But he hit out at the opposition conservatives and the former communist Party of Democratic Social (PDS) for forming what he called a strange "blocking alliance".
"I have no understanding for those who take advantage of the need for reform in our society to conduct their own little party political intrigues," he said in his first public press conference in Berlin since his summer holiday.
With Schroeder's Social Democrats struggling badly in opinion polls, the demonstrations could have important political implications for the state election in Brandenburg, eastern Germany, next month.
The government says the job market changes are necessary to revive economic competitiveness but the eastern states, where unemployment was at 18.5 percent in July, will be hit hardest.
In a determined show of optimism, Schroeder said that Germany was in a phase of stable growth that was unlikely to be damaged by the increase in oil prices, despite a major institute saying a new hike would hurt investor confidence.
"The dangers linked to the way oil prices are evolving... are not affecting the world economy at the moment and therefore are not hurting German exports," he said. "Obviously, we will have to follow this evolution very closely."
As he spoke, New York's main oil contract climbed to a new record high of 47 dollars per barrel in electronic pre-trade, amid fears of supply problems in Iraq and Russia and ahead of weekly estimates of US oil inventories.
The contract had hit a record closing level of 46.75 dollars on Tuesday.
On Iraq, the chancellor said that Germany wanted to deepen its economic and political relations with the war-torn country and was studying how to substantially reduce Baghdad's debts.
"We want to help," he said. "It is in the interest of everyone to ensure that there is greater stability in the region."
He said he would discuss the issue with Iraqi President Ghazi al-Yawar when he came to Germany on September 9-12 and confirmed that Iraqi Prime Minister Iyad Allawi had also accepted an invitation to visit.
"These visits will provide an opportunity to discuss perspectives," he said.
Schroeder reiterated that Germany would not send troops to Iraq.
In what has been a period of reconciliation -- paying a first visit to his father's grave in Romania and becoming the only German leader to attend D-Day celebrations in France -- Schroeder also acknowledged that he and his wife had adopted a child, reported to be a three-year-old Russian orphan.