Page last updated at 09:39 GMT, Monday, 10 May 2010 10:39 UK

Germany's Chancellor Merkel faces election fallout

By Oana Lungescu
BBC European affairs correspondent, Berlin

Germany's Chancellor Angela Merkel likes to take her time before making important decisions. But in North Rhine-Westphalia (NRW), her timing couldn't have been worse.

Hannelore Kraft
Hannelore Kraft: "The SPD is back"

For months, she had tried to delay the unpopular rescue package for Greece until after Sunday's election in Germany's most populous state, only to push it through parliament in the week before the vote as the crisis threatened to escalate out of control.

On Sunday morning, as Mrs Merkel watched the Victory Day military parade in Moscow, marking the 65th anniversary of the defeat of Nazi Germany, she was also contemplating a dramatic double defeat for her centre-right coalition in NRW and for Europe's single currency. EU finance ministers were gathering in Brussels in a last-ditch attempt to shield the euro from the growing contagion of the Greek crisis.

Greece came back to haunt Mrs Merkel with a vengeance.

According to a poll on Saturday, 21% of voters in NRW said their decision would be influenced by the bailout.

And the next day they voted the regional coalition of Mrs Merkel's Christian-Democrats (CDU) and their liberal Free Democrat allies (FDP) out of office.

NRW traditionally provides a template for national politics in Germany.

Five years ago, the state premier Juergen Ruettgers heralded Mrs Merkel's victory in the national election when he took NRW for the CDU after almost four decades of rule by the Social Democrats (SPD).

An ashen-faced Mr Ruettgers described Sunday's results as "bitter".

The CDU won 34.6% of the vote, 10 points less than five years ago and their worst showing ever in the state.

The FDP said said it was "disappointed". With 6.7%, the liberals polled considerably less than the 14.9% they achieved in last year's general election.

Bouncing back

By contrast, the regional SPD leader Hannelore Kraft was radiant.

"The SPD," she announced, "is back!"

This is a personal triumph for the 48-year old economist with the common touch - her family name means "power" in German - and a much-needed boost for her party, which registered its worst result since World War II in last September's general election.

NRW state premier Juergen Ruettgers
For NRW state premier Ruettgers, it was a "bitter" result

Ms Kraft's preferred allies, the Greens, are the winners of the day, practically doubling their regional vote to 12.1 %.

However, the SPD won fewer votes than five years ago and remains a whisker behind the CDU, with 34.5 %. No regional government can happen without them, but they won't find it easy to form a new coalition either.

Ms Kraft has not entirely ruled out co-opting the Left party, which will enter the NRW state parliament for the first time with 5.6%.

But the party, which includes former communists, is distrusted by many in the SPD and described as "extremist" by the CDU.

A grand coalition between the CDU and the SPD looks possible, but it is unclear who would lead it.

National impact

For the governing coalition in Berlin, this is "a warning shot," as the Liberal Foreign Minister Guido Westerwelle admitted.

Chancellor Angela Merkel
Merkel faces a series of concerns

Critics say Mr Westerwelle himself should take much of the blame for insisting on tax cuts at a time when the budget is under strain from the economic crisis, high borrowing and falling tax revenues.

Chancellor Merkel is also coming under attack for her constant dithering.

The bickering between liberals and conservatives, which has dogged the governing coalition ever since it was formed six months ago, could get even worse, with each party blaming each other for losing NRW, and with it the majority in the upper house of parliament, the Bundesrat.

Chancellor Merkel will find it much harder to push the coalition's agenda through parliament.

She will have to negotiate with the opposition on key policies, including tax cuts, health system reforms and nuclear energy.

Uncertain times

Adding to Mrs Merkel's problems are concerns about the health of Finance Minister Wolfgang Schaeuble, her right-hand man during the Greek crisis.

SPD balloon at a party rally
After last year's poor showing, the result was sweet for the SPD

On Sunday, he was taken to hospital in Brussels, apparently suffering an allergic reaction to a new medicine.

Mr Schaeuble, uses a wheelchair after being shot by a mentally-ill man in 1990, has recently spent long periods in hospital because of a badly-healed wound after an operation.

He was replaced at the last minute in Brussels by Interior Minister Thomas de Maiziere.

Back from Moscow, Chancellor Merkel moved fast to show that she remains fully in charge in these uncertain times.

She held an emergency cabinet meeting and, after speaking to US President Barack Obama and French President Nicolas Sarkozy, she eventually agreed to the emergency trillion-dollar EU-IMF package late at night.

On Monday morning, she told reporters that it would "strengthen and protect the common currency". But she faces questions in parliament about where all the billions will be coming from. Next month, Germany - Europe's biggest economy and its traditional paymaster - is expected to introduce budget cuts to get its own finances in order.

The Iron Chancellor's reputation has emerged badly damaged from this dangerous Sunday. And from now on, her leadership style will be tested like never before.

Mrs Merkel has only one reason for cheer. The election in NRW was the first - and last - regional poll in Germany this year.

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