The Bundestag lower house defeated the measure with the help of deputies from Schroeder's coalition of Social Democrats and Greens who followed the chancellor's call to abstain in his bid to bring the general election forward by 12 months.

German President Horst Koehler said that Chancellor Gerhard Schroeder asked him Friday to dissolve the parliament and call new elections after Schroeder met his goal of losing a confidence vote before the chamber.

Koehler has the power under Germany's Basic Law to call a new general election, which Schroeder argued was necessary because he could no longer count on the support of his ruling coalition of Social Democrats and Greens.

The president now has three weeks to decide on Schroeder's request. If he agrees and the constitutional court rejects any challenges to the bid, the elections are likely to be held September 18.

In a speech before the confidence vote, the embattled leader said his painful economic reform drive had cost him crucial support that he now hoped to regain.

"Without a new mandate, it is impossible to continue with my policies," Schroeder told the chamber.

"If we want to continue with the reforms, and we must, we need to seek a new mandate through elections."

The 61-year-old Schroeder, who wore a dark suit and struck a sombre tone, said the "painful" loss of a May election in Germany's most populous state had made it clear that his governing centre-left coalition was at risk.

President Horst Koehler now has 21 days to decide whether to dissolve parliament and order new elections, which will probably take place on September 18.

Schroeder's Social Democratic Party (SPD), beleaguered by the anaemic economy and around 12 percent unemployment, is trailing the conservative opposition Christi-an Union bloc (CDU/CSU) by about 20 percentage points in most polls.

A conservative victory would see opposition leader Angela Merkel become Germany's first woman chancellor.

In a speech that often sounded like a farewell, Schroeder said that the unpopular economic and labour market reforms his government introduced since it took power in 1998 had been bold and essential steps that his predecessor Helmut Kohl had failed to undertake.

"The reform process is unique in the history of the federal republic in its scope and consequences," Schroeder said.

"We tackled what our predecessors neglected. We started what the CDU and the FDP never had the courage to do in 16 years in government," he said, referring to the conservatives' liberal coalition partners, the Free Democrats.

He said that his SPD had paid the political price for those reforms, known as Agenda 2010, but was ready to battle to win back Germ-any's voters.

"Agenda 2010 led to fights betw-een the parties and within the parties and -- I do not want to hide it -- my party suffered in particular," he said.

Germans are angry that Schro-eder has failed to keep his seven-year-old promise to drive down unemployment and that they now in fact have more reason to fear for their jobs than at any other time since World War II.

But many left-wing SPD deputies have publicly questioned Schroe-der's course, saying that measures such as cuts to unemployment benefits put an unfair burden on the poor.