Bloomberg News

Merkel Buffeted by Political Woes That May Deflect Crisis Effort

December 14, 2011

Dec. 14 (Bloomberg) -- German Chancellor Angela Merkel is being buffeted by domestic political turbulence, threatening to distract her efforts to follow through on a European summit agreement last week to tackle the euro debt crisis.

Christian Lindner, the general secretary of Merkel’s Free Democratic coalition partner, unexpectedly quit today amid a party tussle on bailouts. Separately, Merkel’s spokesman said the chancellor has full confidence in Christian Wulff, Germany’s president, after a Bild report that he misled lawmakers over a 500,000 euro ($649,000) home loan.

The political turmoil engulfed Merkel’s administration five days after she secured what she called a “breakthrough” European deal to enforce stricter budget rules and to stem the financial contagion now in its third year. That uncertainty may disrupt her efforts to restore market confidence by pushing the steps agreed on in Brussels through parliament in Berlin.

“The FDP and Wulff are a distraction in many ways,” Joerg Forbrig, an analyst at German Marshall Fund of the United States, said by phone. “The FDP is basically in the process of dismantling itself as a party while serving in government.” It’s “the last thing Merkel needs right now.”

Merkel’s chief spokesman, Steffen Seibert, was forced to respond to questions about both Lindner and Wulff at a regular government press conference in Berlin today, eclipsing queries on the coalition’s approach to combating the debt crisis.

“The chancellor sees no reason to doubt the statements the president has made in this matter,” Seibert said. Merkel “trusts him, his person and his conduct in office.”

‘Completely Unaffected’

Merkel herself fielded a question on Lindner’s resignation during a media briefing with Tajikistan’s President Emomali Rahmon, and dismissed the impact on her government.

“We work together very successfully in the federal government,” Merkel said of the coalition allies, noting that the FDP planned to name a replacement quickly. “I believe that we can work together in the government completely unaffected.”

Economy Minister Philipp Roesler, who leads the Free Democrats, later proposed FDP treasurer, Patrick Doering, to succeed Lindner.

Lindner, 32, resigned two years after taking the job as party members squabbled over an internal vote that seeks to build support among bailout skeptics to reject the permanent rescue fund, the European Stability Mechanism.

While the party is awaiting the result of the ballot, due on Dec. 16, Roesler angered those who reject the fund, led by lawmaker Frank Schaeffler, by saying in a weekend interview that the vote had not drawn enough participants to establish a quorum.

‘Dead-Duck’ Partner

The upshot for Merkel is “a dead-duck coalition partner whose actions may now become unpredictable,” Nils Diederich, a politics professor at Berlin’s Free University, said by phone. “That’s a risk for Merkel as she tries to navigate parliament through giving up some sovereignty in the name of fiscal union as well as increase taxpayers’ input into rescuing the euro.”

Merkel’s government would risk collapse if the referendum showed majority support among the junior coalition party for rejecting the rescue fund, said Peter Matuschek, an analyst at Forsa polling group. Even without such a meltdown, “it will become tense over the next few weeks,” he said by phone.

Lindner is an ally of Roesler, who replaced Foreign Minister Guido Westerwelle as party leader in April amid slumping support that has yet to recover. Roesler also inherited Westerwelle’s role as vice chancellor to Merkel.

Free Democratic support has collapsed since the party won a record 14.6 percent in September 2009 elections, helping Merkel to a second term and allowing the FDP to enter the coalition as junior partner to Merkel’s Christian Democrats. Most polls show FDP backing at or below the 5 percent threshold needed to win seats in parliament.

“The FDP leadership is imploding and we can’t be certain what will emerge after today’s palace coup,” said Diederich.

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

-0- Dec/14/2011 20:09 GMT

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Patrick Donahue at pdonahue1@bloomberg.net

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


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