Under pressure to reform his recession-hit economy, the French Socialist leader was a guest speaker at the event in the eastern German city, where conservative Chancellor Angela Merkel was among the guests.
"Progress also means making courageous choices in difficult times to save jobs and anticipate industry changes, and that's what Gerhard Schröder did here in Germany and which allowed your country to move ahead of others," Hollande said.
"These decisions aren't easy to take, they can spark controversy, but nothing is built, nothing solid is built by ignoring reality," Hollande told the SPD birthday bash with 1,600 guests, including Schröder.
Hollande is under pressure from the left wing of his Socialist party, which is strongly critical of the influence Germany has on economic policy in the European Union, and indirectly on France.
Social Democrat Schröder's former centre-left coalition government implemented tough labour and welfare reforms, dubbed Agenda 2010, starting a decade ago. They included tax cuts and reduced jobless, pension and medical benefits.
The reforms are credited with boosting Europe's largest economy, which booked 0.1-percent growth in the first quarter, but have also been blamed for widening the wealth gap and creating a new group of "working poor".
This split perception is a problem for the SPD, which hopes to unseat Merkel in September 22nd's elections but has suffered low approval ratings, as Hollande has in France since taking office a year ago.
Latest German polls give Merkel's conservatives – who concede that they have benefited from growth spurred by their predecessors' reforms – a lead of 41 percent against 24 percent for the SPD.
Merkel – often voted Germany's most popular politician and regarded as Europe's most powerful leader amid the financial crisis – did not speak at the anniversary, considered a historical event which she attended as national leader.
Tensions have simmered in recent months amid a European austerity-versus-stimulus debate between the Hollande and Merkel governments, despite Merkel's protestations that their friendly relationship is Europe's "best-kept secret".
While some members of Merkel's coalition have painted recession-hit France as slow to reform, French Socialists, in a draft document which was later revised, accused Merkel of selfishly driving fiscal belt-tightening that heaps pain on the people.
'Path of unity'
On Wednesday, however, Hollande said that France and Germany were working on a joint economic initiative to put to their EU partners at a June summit set to focus on boosting growth and jobs.
In his speech on Thursday, Hollande also urged a "path of unity" between Berlin and Paris to advance the European cause, especially against youth unemployment, and to fight populism and nationalism in Europe.
He was the guest of honour at what the SPD dubbed Germany's biggest international political event of the year, its birthday bash in Leipzig, where its precursor, the General German Workers Association, was founded in 1863.
Germany's oldest political party invited nearly 50 current and former heads of state and government to celebrate its turbulent history, which saw it advance workers rights, resist the Nazis and win the vote for women.
Even Merkel paid tribute and in a newspaper editorial praised the SPD as a historically "valiant and unyielding voice of democracy in Germany."
Merkel, the head of the Christian Democratic Union, wrote in the local daily the Leipziger Volkszeitung: "For these services, which cannot be valued highly enough, the SPD deserves my respect and appreciation."
On the eve of the event, a worldwide group of about 70 left-of-centre parties – including Britain's Labour Party, the African National Congress and the US Democrats – had founded a "Progressive Alliance" in Leipzig.
Intended as an alternative to the Socialist International, a coalition founded in Paris in 1889, its stated goal is a 21st century "of democratic, social and environmental progress."