Merkel’s centre-right hopes at risk in German vote

Sat Sep 26, 2009 6:38pm EDT

By Noah Barkin

BERLIN (Reuters) – German Chancellor Angela Merkel looks set to win a second term in Sunday’s election, but faces a tough battle to secure the center-right government she says is needed to nurture Europe’s largest economy back to health.

Merkel, 55, remains popular four years after taking power atop an awkward “grand coalition” with the Social Democrats (SPD), and polls give her conservatives a healthy 8-11 point lead over to their traditional rivals before the vote.

But after a campaign widely criticized for lacking passion and substance, Merkel’s party has seen its support dip in the final weeks and she is no longer assured of her coalition of choice with the business-friendly Free Democrats (FDP).

Should she fail in her bid to team up with the FDP, she will probably be forced into the same uneasy right-left partnership that she has presided over since 2005.

That would doom her plans to reduce taxes, pare back the role of the state in the economy and extend the lifespan of German nuclear power plants that are scheduled to be shut down over the next decade.

At a final rally in Berlin on the eve of the vote, Merkel told some 3,000 supporters that Germany needed the stability that would come with a center-right government, and said the SPD would push up taxes and endanger a nascent recovery.

Her SPD challenger, Frank-Walter Steinmeier, speaking in Dresden, urged voters to block Merkel’s preferred coalition, saying it would polarize German society by helping the wealthy at the expense of the poor.

“It’s going to be another close race,” said Manfred Guellner, head of the Forsa polling group, whose survey on Friday showed Merkel just shy of a center-right majority. It had one in five voters still undecided.

CRUCIAL TIME FOR ECONOMY

The election comes at a crucial time for Germany, which is just emerging from its deepest recession of the post-war era.

The next government will have to get a soaring deficit under control and cope with rising unemployment as the impact of 81 billion euros ($119 billion) in government stimulus fades.

Germany’s fragile banks have reined in lending, sparking fears of a credit crunch. Longer-term, Berlin must find solutions to an aging population that threatens to send public pension and healthcare costs soaring over the coming decades.

In spite of these challenges, the German vote is not seen as a “Richtungswahl,” or turning-point election, and the next government is unlikely to push for radical new policies, regardless of its make-up.

Unlike voters in the United States and Japan, Germany’s 62 million-strong electorate does not seem keen for change. Many are content with the steady “small-steps” leadership of Merkel, the country’s first woman chancellor and first to have grown up in the former communist east.

In her first term, she patched up relations with Washington after the strains of the Iraq war and won respect for brokering a series of deals on climate change during Germany’s dual presidencies of the European Union and Group of Eight in 2007.

At home, Merkel adapted her policies to the shape of her coalition, shelving plans for far-reaching economic reform that she advocated in her first campaign and focusing on traditional themes of the left, such as family policy and the environment.

Her government was accused of reacting too slowly to the financial crisis but it then pushed through two successive stimulus packages, including a car-scrapping scheme that shored up German automakers and was later copied by the United States.

Despite successes over the past four years, some analysts fear a new grand coalition would be less stable and harmonious than the first, possibly even breaking apart prematurely.

“A revival of the grand coalition would be no more than a marriage of convenience, bound to fracture quickly,” said Carsten Brzeski, senior economist at ING.

If the race is tight, pollsters say Merkel may benefit from a quirk in German election rules that could give her conservatives extra “overhang” seats in parliament and tip the scales toward a center-right majority.

(Editing by Kevin Liffey)

[original]

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