MNI ANALYSIS: Keep Calm And Vote Merkel Stance Winning For CDU

--Latest Polls Suggest Germany Set To Give Chancellor Fourth Term

--Still Unclear Which Parties Will Form Governing Coalition

By Tara Oakes

     LONDON (MNI) - Untroubled by rhetoric by fire or fury, a German woman

relaxes, eyes closed in a flourishing field. "Enjoy the summer now -- and make

the right choice in autumn," the slogan suggests with hazy insouciance. Above,

the letters of German Chancellor Angela Merkel's CDU party float, unobtrusive to

the rays of the August sun.

     Pollsters and think tanks are proving that this softly-softly tactic is

paying off big time for the centre-right CDU/CSU team, who are riding high with

38% of the projected vote in figures released Saturday by Emnid.

     Merkel, the party's figurehead and Chancellor since 2005, gave her first

full campaign speech in Dortmund Saturday with little indication that she would

stray from the party line of promising electors more of the same.

     The message is winning and Merkel looks set to coast to the largest

proportion of seats in the Bundestag on September 24 - the question now is just

who will prop up her government.

     SPD

     Current coalition partners the centre-left SPD have been burned by their

experience as the junior partner in a 'grand coalition'. Chancellor candidate

Martin Schulz, former head of the European Parliament, has tried to bring the

fight to Merkel with little avail -- trailing 14 points behind at 24%, according

to the same poll.

     "It's a very difficult campaign, because it's a problem that Merkel has no

campaign at the moment," SPD MEP Joachim Schuster told MNI.

     Schulz's failure to set an aggressive campaign agenda can partly be

attributed to the season, with little appetite among voters for disruptive

summer politicking. But the wider trend appears to be an acceptance that when

times are good, there's no need to rock the boat.

     Schuster said that the SPD had to push public awareness of their own part

in setting up those good times, rather than letting the relative silence of

Merkel's campaign tacitly grant her all the credit.

     For Schuster, another 'grand coalition' should only be toyed with if the

SPD were the bigger partner.

     "If we are not successful and the Christian Democrats win the election, I

am against a new coalition. It's impossible after the last years that we will

always be the junior partner," he told MNI.

     FDP

     It may yet be that the SPD aren't even asked to consider coalition talks --

September's vote is likely to herald the return of the liberal FDP to the

parliament after their shock failure to meet the minimum threshold last vote.

     The FDP, pulling 8% in the poll, are closer ideologically to the CDU and

have long been their favoured coalition partners.

     But the party had learnt from its mistakes of too closely aligning

themselves with the CDU, FDP MEP Michael Theurer told MNI.

     "Voters could not recognize their own liberal, market-oriented handwriting

of the FDP," Theurer said of the last campaign. The FDP have therefore carved

out a distinctive niche calling for Germany's large economy to "adapt to the

digital challenge", he added.

     "We will not enter into a coalition if we cannot safeguard or guarantee a

change in the political line of the government," Theurer told MNI.

     BRACING FOR THE FUTURE

     FDP proposals to provide incentives for venture capital, cut income tax and

remove red tape for SMEs are one way to address how to arm the German economic

juggernaut for the future. Because if the CDU continues with the same hesitancy

in its economic programme as in its national campaign, risks increase that it

will be ill-equipped to keep up the success in a changing world.

     "There are changes going on internationally, so we cannot just keep on

going and hoping that our exports will be bought throughout the world. We are an

ageing society, we are lacking in digitalization, we have lots of problems with

infrastructure and investment, so we need to have a lot of reform in these

respects," the head of the globalization and world economy programme at

thinktank DGAP, Claudia Schmucker, told MNI.

     Market participants are also raising worries.

     "Relaxed monetary policy is likely to sustain strong economic growth in

Germany for some years to come. But behind the gleaming facade, German economic

competitiveness will continue to falter," Commerzbank warned Friday, suggesting

that Germany could be the next France if another recession hit.

     The SPD want to harness the country's powerful economy for more

infrastructure spending, echoing the desires of France and the EU. But they are

also calling for generous labour market reforms which could push more costs onto

employers.

     Voters' resistance to change hasn't welcomed the comparatively lavish SPD

proposals. It also helped scupper transatlantic trade deal TTIP with the U.S.,

much to Merkel's dismay. For Schmucker, the re-elected chancellor will have to

set out a firmer case for free trade if Germany is to keep profiting from

globalization.

     "After the elections she really needs to do a lot more on trade to convince

the public. She needs to get the French on their side, because Macron is really

similar in trade -- to get both of them together to show that it's not only

Germany, it's Germany and France together," Schmucker told MNI.

     GREENS

     The Green party's rejection of TTIP was certainly in line with the public

mood -- and some have mooted the idea of their joining a so-called 'Jamaica'

coalition with FDP and the CDU/CSU to reach the numbers to govern.

     For Schmucker, this would be a "huge problem" for trade policy, because of

the Green's standard "distrust" of the U.S.

     But Green MEP Sven Giegold pointed out that the Greens already work with

the CDU/CSU in coalitions running four of the German Lande (regions).

     "These governments are always difficult, because from an ideological point

of view of course we are very far apart. On the other hand, we have one

long-running experience with them: that is that once you have a deal, you have a

deal," Giegold told MNI.

     For any coalition deal, the Greens would expect compromises to be offered

in line with their 10-point electoral programme, which includes a call for

emissions-free cars that elsewhere would have won votes after the "Dieselgate"

scandal.

Merkel's Dortmund speech did take in international criticism of the German car

industry, which she accused of eroding trust. But she also rejected Schulz's

pitch for a quota on electric cars on the continent, insisting that petrol and

diesel vehicles were still needed.

     The sprawling car lobby and its influence on politics has been largely

shrugged off in Germany, even after Dieselgate.

     EUROPE

     Much of Europe has anxiously waited for Germany to step up the gas in terms

of the elections, at least -- with key policy areas of closer Economic and

Monetary Union and Greece needing the input of a secure German government, out

of campaign mode.

     With the backing of France, progress could be made to create a Eurozone

finance minister for the bloc.

     "This will come anyway and everybody knows it," Giegold, who has argued in

favour of the position, told MNI, adding that there would be "additional

momentum" after the national vote.

     But all eyes will also be on Germany to grant further debt relief to Greece

-- one of the conditions of the IMF's signing up to the latest disbursement

programme and a deeply unpopular stance with German voters.

     "I think the present parties are really hoping that it will not come up

before the election -- even though the SPD might be softer to that, the public

is opposed," Schmucker said. But eventually, she added, the government would

have to cave to the international pressure on for Greek debt relief.

     "Merkel is a European person and there's a lot of pressure right now to

keep Europe together and to do more about it, so I think eventually she will

give more and she will participate in a deal," Schmucker said.

     With only six weeks until the election, it could all still be to play for

-- but if all goes to plan, the CDU are hoping that they won't have to play at

all.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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