Support for both Chancellor Gerhard Schroeder’s center-left Social Democrats (SPD) and the center-right opposition Christian Democrats (CDU) slipped by about 7 percentage points in the states of Saxony and Brandenburg.

The results reflected anger over planned cuts in welfare payments for the unemployed — an issue that has sparked protests in the east, where the jobless rate of nearly 20% is almost twice that of the more prosperous west.

But despite the sizable protest vote, mainstream parties held on to control in both states.

In Brandenburg, the rural state surrounding Berlin, the Social Democrats scored about 32% — enough to retain their "grand coalition" with the state’s Christian Democrats, who garnered nearly 20% of the vote.

In Saxony, one of the most prosperous regions in the formerly communist east, the Christian Democrats lost their absolute majority but retained almost 42% of the vote, leaving the door open to a coalition with the pro-business FDP, the environmentalist Greens or the SPD.

Chancellor Schroeder was upbeat on the SPD’s better-than-expected showing, saying the results offered his party an encouraging sign ahead of crucial state elections in Germany’s most populous state, North Rhine-Westphalia, next year.

"That makes us optimistic, for North Rhine-Westphalia too," he said. "It’s going to give us an upward lift."

In results that embarrassed eastern German leaders and worried some observers in western Germany, fringe parties tapping into disappointment over welfare cuts registered gains in the weekend poll.

The far-left ex-communist Party of Democratic Socialism took 28% of the vote in Brandenburg, and, in a result decried by leaders across the political spectrum, the far-right National Democratic Party (NPD) scored 9% in Saxony.

Chancellor Schroeder was among the leaders who expressed concerns over the far right’s gains. "That has to worry every democrat," he said.

In the vote’s aftermath, leaders across party lines pledged to isolate far-right representatives in parliament, refusing any cooperation on legislative initiatives and committee assignments.

Experts also said that the NPD was unlikely to gain support in other states or at the national level.

German President Horst Koehler, a former director of the Washington-based International Monetary Fund, agreed.