Merkel's CDU ends coalition with SPD in state

BERLIN (Reuters) - Chancellor Angela Merkel's conservatives in Schleswig-Holstein deliberately lost a vote of no-confidence Thursday, engineering an early state election to end a coalition with the Social Democrats after a row.

Two months before a federal election, mutual acrimony in Schleswig-Holstein has exposed a deep lack of trust between the two parties who have shared power at a federal level since 2005.

Recriminations threaten to sour the national election campaign in which Merkel will fight Social Democrat (SPD) Foreign Minister Frank-Walter Steinmeier.

"This alliance between the Christian Democrats (CDU) and SPD has no future," Peter Harry Carstensen, head of Merkel's CDU in Schleswig-Holstein told the state parliament before he lost a no-confidence vote he orchestrated.

"Things cannot go on like this. The trust between the coalition partners has been irretrievably damaged," he said.

At a federal level, the two parties have put aside their differences to retain power but Merkel may end up in another "grand coalition" with the SPD if her conservatives and the pro-business Free Democrats (FDP), her favored partner, fail to win enough votes to form an alliance.

The Schleswig-Holstein partnership has never been happy, not least because of the poor personal chemistry between the state leaders of the two main parties.

The situation came to a head last week when Carstensen declared an end to the coalition and accused Ralf Stegner, who heads the SPD in the state, of attacking jointly agreed policies. He antagonized the SPD further by sacking four SPD cabinet members.

The SPD accuse Carstensen, who trained as farmer, of lying over a bonus payment to a top banker and of opportunism.

Polls show the CDU may have enough support to able to form a coalition with the FDP in the September 27 state vote, the same day as the federal election.

Commentators say the CDU's position may well be weaker in May, when the state vote had been due to take place, as the effects of the recession could be feeding through and unemployment could be rising sharply by then.

"This sudden power shift lacks legitimacy and morals," said Stegner, a political scientist with a penchant for bow ties.

One of the main points of contention between the parties has been a 2.9 billion euro ($4.13 billion) bonus to the head of publicly-owned HSH Nordbank, which has made use of government aid.

Carstensen has confirmed he gave false information to parliament by saying the SPD had approved the bonus.

The small northern state of Schleswig-Holstein, which has North Sea and Baltic coastlines and borders Denmark, is a relatively poor state with strong fishing and shipbuilding traditions. The state is home to the Kruemmel nuclear plant which has been beset by technical problems.

(Editing by Elizabeth Fullerton)