Bloomberg News

Merkel Takes Debt Crisis to Home-State Campaign in Taste of 2013

September 02, 2011

Sept. 2 (Bloomberg) -- German Chancellor Angela Merkel opened her party’s campaign for Sept. 4 elections in her home state with a theme that transcended local issues: the sovereign debt storm battering Europe and global markets.

Merkel’s electoral gambit reflects hardening battle lines between her coalition and the opposition over how to quell the turmoil that has spread from Greece. By turning the vote into a referendum on her push for deficit cuts and rejection of joint debt guarantees, she may be honing a message for her re-election bid in 2013, said Carsten Brzeski, an economist at ING Group.

The debt crisis “is something that polarizes,” Brzeski said by phone from Brussels. “It helps to distinguish her from the Social Democrats, who support euro bonds. It’s also directed at her own coalition in Berlin, a clear message to her own party and also to the Liberals to close ranks.”

In nine campaign stops over 18 days, including two today and a final rally tomorrow, Merkel is taking her call directly to voters in Mecklenburg-Western Pomerania, the eastern state on the Baltic Sea where she has her electoral district.

“You know very well how things work here, how local government has to save, that one can’t afford everything -- and naturally that applies to all of Europe,” Merkel told an Aug. 18 rally in Parchim, a rural county seat of half-timbered houses about 140 kilometers (90 miles) northwest of Berlin, where supporters filled benches on the Shoe Market square.

Countries must also boost growth, and “there is dispute about the concept of how we do this,” she said. “When you go to vote on Sept. 4, you can help decide.”

Election Defeats

Merkel’s coalition has been defeated or lost votes in all five German state elections so far this year as voters resisted her bid to prevent a euro-region breakup by putting more taxpayer money on the line for sovereign rescues. Merkel blamed her party’s May 2010 defeat in North Rhine-Westphalia, the country’s most populous state, on the first Greek bailout, a result that cost her a majority in parliament’s upper house.

In Mecklenburg, polls suggest Merkel’s tack has failed to stop the Social Democratic Party’s advance, with support for her Christian Democratic Union holding steady around the level of the last election in 2006. That points to a repeat of the SPD- led coalition with Merkel’s party that has run the regional administration in Schwerin for the past five years.

Hanseatic Merchants

In Stralsund, the port city at the heart of Merkel’s electoral district, CDU Mayor Alexander Badrow sits in his office four blocks from the sea in the red-brick city hall that dates back to the 13th century. Merkel took President George W. Bush there during the Group of Eight summit she hosted in 2007.

Emblems of Hanseatic cities decorate the building’s gable, an indication of the money made by Stralsund’s merchant traders in past centuries, while young people on laptops sip lattes at a café across the cobbled Old Market Square.

Badrow, 38, said the debt turmoil that threatens the global economic recovery has reached the Baltic Sea coastal state, registering with voters more used to discussing local issues and who now express concern at “how we’ll get it under control.”

“People ask me: ‘Is helping other countries the right thing to do, because these are basically funds that we have to do without?’” Badrow said in an interview, surrounded by oil paintings of former city leaders and sailing ships in bottles. “We have to save and we have all kinds of constraints, so is it right to do this to avert something even worse?”

Opposition Stance

The Social Democrats, the main opposition party nationally, support joint euro bonds, restocking the European rescue fund and forcing investors to take losses of as much as 50 percent to help Greece recover, proposals that feed into early jostling for the 2013 national vote.

Backers include Peer Steinbrueck, Merkel’s finance minister in her first term and the nation’s most popular politician in a ZDF television poll published Aug. 12 that ranked Merkel fifth. The best-selling Bild newspaper said yesterday that Steinbrueck should be the SPD’s candidate to run against Merkel in 2013. Former SPD Chancellor Gerhard Schroeder has also backed Steinbrueck as his party’s chancellor candidate.

Merkel is taking her message of rejection to one of Germany’s economically weakest areas. Mecklenburg-Western Pomerania, which shares a border with Poland, is a largely rural state reliant on low-paid seasonal work in tourism or farming. Otto von Bismark, Germany’s first chancellor, once said that if the world ever came to an end he’d move to Mecklenburg, “because everything happens 50 years later there.”

Slowest Growth

Today, it has the lowest population density of Germany’s 16 regions and the smallest gross domestic product per person. Of the 30 companies in the benchmark DAX index, not one is based there. The local economy grew 0.3 percent last year, the least of any state, even as national GDP expanded 3.6 percent, according to the Federal Statistical Office. Unemployment, at 11.5 percent in August, was the nation’s third-highest.

With tax revenue forecast to drop as the population dwindles, all the main parties have committed to fiscal discipline: The state hasn’t run a budget deficit since 2005, slashing costs by reducing government services.

Even so, backing for the state’s ruling Social Democrats was at 35 percent, up from 30.2 percent in 2006, while Merkel’s CDU was at 28 percent after 28.8 percent, an FG Wahlen poll for ZDF showed Aug. 26. With the anti-capitalist Left Party little changed at 16.5 percent, the SPD may be able to choose between Merkel’s party or the Left as junior partner.

Merkel is already lowering expectations. Asked by the Bild am Sonntag newspaper what her election goal is, she said that her party had ensured “a successful grand coalition” with the Social Democrats in Mecklenburg-Western Pomerania. The aim now is “for the CDU to be as strong as possible and to get back into government,” she said in the interview published Aug. 28.

For all her budget-cutting mantra plays to voters in the state, Merkel’s party alone can’t claim the mantle of fiscal stewardship, said Nikolaus Werz, a political scientist at Rostock University.

“My gut feeling tells me you can’t score a lot of points with the euro issue,” Werz said in Aug. 26 telephone interview. “I can see that Merkel would want to raise the issue. But I’m very skeptical that she can score with it in a big way.”

--With assistance from Leon Mangasarian in Berlin. Editors: Alan Crawford, James Hertling

To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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