(Reuters) – Angela Merkel is looking increasingly
isolated at home and in Europe after what she called a “bitter, painful defeat” for her party in a
weekend election in Germany’s most populous state.
visit of the German Spanish Europa School Friedensburg on a European project day in Berlin, May 14,
2012. REUTERS/Thomas Peter
The German chancellor said the vote did not change her view that fiscal rigor
was the best path for Europe, although it highlighted resistance among Germans to enduring the kind of
austerity she has forced on debt-laden southern nations.
Merkel will have to contend with a more
aggressive opposition and less compliant allies with the setback for her Christian Democrats (CDU) in
North Rhine-Westphalia on Sunday at the hands of the centre left Social Democrats (SPD).
And
France’s new Socialist President Francois Hollande is expected to press for new steps to boost growth
in Europe, where many countries are struggling with recession and rising unemployment, when he meets
Merkel in Berlin for the first time on Tuesday.
“It does not affect the work we have to do in
Europe,” Merkel said on Monday when asked about the impact of the NRW vote on her
policies.
Nobody in her government opposed growth, she said, but the question was the impact of
stimulus measures on the budget.
The CDU’s campaign for the state vote focused on cutting the
state’s 180 billion euro debt mountain against Social Democrat plans for a slower approach to budget
consolidation, but it was also a personality battle that the CDU lost.
“Yesterday was a bitter
day, it was a bitter, painful defeat,” Merkel said after results showed the SPD won 39.1 percent
against 26.3 percent for the CDU.
Despite the growing austerity backlash, people close to Merkel
have signaled that she has no intention of making big concessions to Hollande, beyond agreeing to a
form of “growth pact” containing modest steps long under discussion in Brussels.
German
officials, including Finance Minister Wolfgang Schaeuble, have suggested over the past week that they
could tolerate higher inflation at home to help compensate for deflationary tendencies in Europe’s
southern periphery.
But they are ruling out stimulus measures that would raise debt levels. One
senior aide to the chancellor told Reuters on condition of anonymity that she was “willing to talk
about intensified growth and employment strategies” but only as long as they didn’t involve new
deficit spending.
One possible area of compromise is on deficit targets for euro zone weaklings, even
if German officials have said repeatedly in recent weeks that there is no wiggle room here.
Most
EU governments, the European Commission and the International Monetary Fund (IMF) now believe that some
countries, notably Spain, will need more time to reduce their deficits.
“Merkel will find it
hard to resist them all,” said Charles Grant, director of the Centre for European Reform in
London.
UNRULY PARTNERS
Germany’s Social Democrats (SPD), emboldened by Hollande’s
victory and their big win in NRW, are demanding new growth-boosting steps to complement the German-led
European fiscal pact.
SPD chairman Sigmar Gabriel said the state election had taught the party
the value of being “combative and engaged”.
Merkel needs the SPD’s support to push her fiscal
compact through parliament, but said on Monday that she would not engage with her rivals until after an
informal May 23 summit in Brussels.
The so-called “troika” of SPD leaders – Gabriel, Peer
Steinbrueck and Frank-Walter Steinmeier – have scheduled a news conference for Tuesday morning, hours
ahead of Hollande’s arrival, to set out their demands.
A day after the regional setback, Merkel
also had to contend with pushier partners within her own coalition.
A surprisingly strong
showing for her federal partners, the Free Democrats (FDP), in NRW has reinforced the idea among the
party leadership that only by standing to Merkel can they hope to thrive.
“If we don’t yield
but stick to our stance no matter how much pressure is on us, we will succeed in the end,” said FDP
chief and economy minister Philipp Roesler.
Horst Seehofer, head of the Bavarian Christian
Social Union (CSU) – the third party in Merkel’s centre-right coalition – has also signaled he is fed
up with the chancellor’s party after weeks-long infighting over childcare and data retention
policies.
The CDU’s rout was widely blamed on its candidate in NRW Norbert Roettgen, Merkel’s
environment minister, who riled voters by refusing to commit to lead the opposition in the state in the
event of a loss.
On Monday he tried his best to deflect blame for the battering away from
Merkel.
“This was a total, comprehensive, clear defeat that we suffered, but it was also my
defeat,” Roettgen said.
“Above all this is the fault of the lead candidate, me, the themes I
set, my style of campaign. I haven’t only taken responsibility, but I believe this was my
responsibility.”
(Additional reporting by Matthias Sobolewski; writing by Noah Barkin
and Stephen Brown; editing by Philippa
Fletcher)
