REPEAT: Germany Far-Right Gains Take Shine Off Merkel Win

Repeats Story Initially Transmitted at 19:04 GMT Sep 24/15:04 EST Sep 24

--Updates With SPD In Opposition, MEP Comments, Later Exit Polls

--Protests In Berlin At AfD Result

By Tara Oakes

     BERLIN (MNI) - German exit polls muted the CDU/CSU celebrations in Berlin

as Germany was rocked by the far-right AfD's national gains.

     The AfD will enter the German Bundestag for the first time, coming in with

a forecast 13.3% in ARD's exit poll and an estimated 87 MPs.

     The numbers foresee a difficult and lengthy coalition-building process

despite Chancellor Angela Merkel's obvious win as she picked up 33% of the vote,

according to ARD.

     Rumblings have already begun about who to approach as potential coalition

partners. Merkel has ruled out working with the AfD and current coalition

partners, the SPD, hit a disappointing 20.8%.

     The AfD's rise transfers them from minority Europhobic outsiders to a real

political force with clout. If Merkel struck a deal with the SPD for another

'grand coalition', the AfD's third place would have them heading the official

opposition and benefitting from an enormous increase in visibility.

     But leading figures in the SPD ruled out another stab at a grand coalition

Sunday night, saying instead they were gearing up to lead the opposition

themselves.

     Their main candidate Martin Schulz has at present ruled out resigning, but

called it a "bitter and difficult day" for the party.

     Many in Brussels and beyond have worried that the AfD's shock popularity

will translate into mainstream acceptability, putting paid to theories that the

far-right's defeat in French and Dutch elections has quashed this wave of

populism. Hundreds protested against the AfD on Berlin's Alexanderplatz after

the projections were published, with Berlin police tweeting that they were being

pelted with bottles.

     Despite the shock far-right showing, polls granted a much-needed sigh of

relief to the liberal FDP, who will make it back into parliament for the first

time in four years.

     There were cheers for the liberal party's showing as well as for the CDU at

Merkel's party headquarters in Berlin.

     Historically, the FDP are preferred CDU/CSU coalition partners, but their

Euroscepticism and uncompromising attitude to the Greek debt crisis could spell

problems for Merkel in Brussels if they are brought in to prop up her

government.

     A deal with the FDP will also likely spell the end of the term of Finance

Minister Wolfgang Schaeuble, whose role would be prized by FDP head Christian

Lindner in any coalition negotiations.

     Eyes will now turn to France, where President Emmanuel Macron is set to

deliver his vision for closer EU cooperation on Tuesday, which will likely have

an emboldened Franco-German vision at its heart.

     Merkel will still be coalition-building when he speaks, but one expert told

MNI before the German vote that she may have to lean heavily on French

enthusiasm to persuade the FDP of the merits of further EU integration.

     "I think it would force Merkel to use the French as a pretext to say we

want to give this new social-liberal president a chance, but she would clearly

have to play the Europe-friendly part," Dr Waltraud Schelkle from the LSE's

European Institute told MNI.

     "From her point of view that's really not comfortable, given the AfD is

already snapping at her heels," she added.

     The two may not gain enough seats to form a majority government alone and

may lean on the Green party, whom ARD predicted at 9.1%, to form a so-called

'Jamaica coalition'. Their standing is also better than expected in earlier

polls and could be a reward for a tougher stance on the Dieselgate scandal than

any of the other mainstream parties.

     CDU MEP David McAllister said on the sidelines of the party's results night

gathering in Berlin that it was full sail to 'Jamaica' if the SPD can't be

persuaded to negotiate, downplaying EU policy rifts with the liberals.

     "The liberals know that we need reforms in the economic and currency union,

in our monetary union, to keep our joint currency stable," he said.

     "We agree with the liberals that debt mutualisation is definitely not an

option for us," he added.

     What concession the FDP or the Greens would demand from a weakened Merkel

remain to be seen. The SPD's strident declaration can also be taken with a pinch

of salt: Germans dislike instability and another election could only strengthen

the AfD, so a failure to establish Jamaica could drag the social democrats back

into the fray.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

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