A day after proposing tax cuts intended to reduce record unemployment, German Chancellor Gerhard Schröder found his governing coalition mired in fresh political problems on Friday. The failure of Schröder's ally Heide Simonis to win re-election as premier of the northern state of Schleswig-Holstein overshadowed his announcement of a reform package which he hopes will reduce unemployment currently standing at over 5.2 million. The setback was trumpeted by many newspapers as another nail in the coffin of Schröder's coalition of Social Democrats and Greens. "This is an historic event, and dangerous for Schröder," Handelsblatt wrote. "The loss of power is all to do with Red-Green (coalition government's) economic policy." Simonis, the only female leader of any of Germany's 16 regional states, failed to regain power because of the abstention of one deputy. The veteran politician ruled out standing as leader again after her humiliation over four rounds of ballots. Social Democrats can now try to elect another minority government with the Greens and toleration from two parliamentarians of the state's Danish minority. A more likely option is a so-called "great coalition" under the leadership of Christian Democrats, who won the most votes in the election in February.