BERLIN -- Among recent telephone calls to Chancellor Gerhard Schroeder was one from President Clinton, who urged the German leader to stand firm in his gathering crisis after his party was battered in recent state elections.

"Clinton expressed solidarity and said that it was not unusual for a leader to go through a trough early in his term," said a senior aide to Schroeder, who spoke of the call on condition of anonymity. "He told the Chancellor to stay the course."

Right now, that course looks anything but assured. Political troughs may be common, but the place where Schroeder finds himself looks more like a ravine.

The central issue is straightforward enough: The German state is running out of money. The costs of unification, of a huge state sector, of an aging population, of high unemployment have finally come home to roost. German debt has ballooned to about $833 billion, 50 percent more than in 1994.

"Our national finances are in a ruinous state," Finance Minister Hans Eichel said Wednesday, adding that Germany's postwar economic status as a "model" was "finished." He noted that one in every four marks of taxpayers' money now goes simply to pay interest on the debt.

The minister was speaking in the Reichstag, which Schroeder is set to address on Thursday, trying to justify a bold plan of spending cuts that spares few government departments, clamps down on pensions and holds down welfare payments.

Those proposed measures have proved deeply unpopular. Disavowed by many members of his own Social Democratic Party, abandoned at the polls, Schroeder has seen his approval rating plunge to under 30 percent.

There are problems of substance, and there are problems of style. The latter are largely of Schroeder's making. But the Chancellor is also trying to do something desperately difficult: change a conservative country deeply attached to its habits.

That country happens to be Europe's most powerful, its economy one-third larger than the next biggest, in France, and on the success of Schroder's bold plan hinge the stability of the euro and, in the end, the mood of the Continent.

The budget, designed to open the way for sharp cuts in corporate and personal tax rates in coming years, is intended to do nothing less than jolt Germans into rethinking their lives. Less state, more personal responsibility; less enveloping social protection, more entrepreneurship -- that is the direction Schroeder has now charted.

"This is a country where people want to be protected and safe, and now they are seeing that, my God, this man actually wants to change us," said Claus Leggewie, a sociologist. "Even if the case for the changes is evident, the shock is profound."

And the reaction violent. The disavowal of Schroeder in elections in the states of Brandenburg, the Saarland and Thuringia -- and in the big, traditionally Social Democratic cities of North Rhine-Westphalia - has been sharper than even his most pessimistic aides predicted, creating the possibility of an unstoppable downward spiral.

Faced by this danger, the Chancellor is taking the advice of Clinton, who would like to see him succeed with his American-style changes. Gone is the Schroeder smile. In its place a new resolve is evident. " Schroeder is not depressed, and he is now very, very determined to push these cuts through," said a spokesman, Bela Anda.

The gamble is clear enough. Painful as the changes will be -- and the bottom of the ravine has surely not been reached yet -- they should start to bring benefits and lower a 10.4 percent unemployment rate in time for Schroeder's re-election campaign in 2002.

But the dangers are also evident. Unlike Tony Blair, the British Prime Minister, whose outlook he shares, and unlike his Christian Democratic predecessor Helmut Kohl, Schroeder does not entirely control his party. A powerful left wing rooted in the labor movement remains committed to "social justice," by which it generally means the preservation of the system the Chancellor is attacking.

Although Schroeder has tried to co-opt this faction by bringing one its leaders, Reinhard Klimmt, into the Government this month, and although no immediate danger exists that Social Democrats in Parliament will vote en masse against the Government, the split weakens the Chancellor. A Social Democratic Party congress at the end of this year will be a stormy affair.

Schroeder is also undermined by the fact that, up to now, he has been unable to rise above a somewhat inhibited, wooden style. Images of the Chancellor as fat cat -- with sharp suits and Cuban cigars -- have far outweighed images conveying a popular touch.

During a joint appearance with Clinton before ethnic Albanian refugees this year, the German leader looked almost painfully at a loss. Later, he told people close to him that did not want to be put in such a situation again.

If regional Social Democratic leaders in Germany's highly decentralized system start to see the Chancellor as a political liability -- a threat to their jobs and power -- he may be at risk.

Schroeder's apparent weaknesses might not matter so much if Germany were not at a crossroads. But for the scale of reforms that Schroeder is proposing, a passionate sketching of a German future and an empathy for people's feelings would certainly help. In this regard, his speech on Thursday to the Reichstag will be crucial.

For Germany is skeptical. It engineered a postwar economic miracle through the social-market model, through consensus, through patient negotiation, through solidarity -- and wide swaths of the population are not ready to acknowledge that times have changed.

"For Americans, when Clinton spoke of a balanced budget, the interest of such an idea was clear enough," Leggewie said. "But a lot of Germans say: A balanced budget, what for? We've done all right on debt and deficits, so let's go on."

As Eichel suggested today, just going on would appear to lead to a not-too-distant wall. Schroeder's predicament, as an already weakened Chancellor, is that in trying to head off such a collision, he may fall himself. After the foreign-policy crisis of Kosovo, he now faces what looks like a much deeper domestic one.