Relief for Merkel as Opel goes her way before poll

BERLIN (Reuters) - U.S. carmaker General Motors (GM.N) could give German Chancellor Angela Merkel a boost less than three weeks before a federal election by deciding to sell carmaker Opel to supplier Magna MGa.TO, a deal she pushed for.

After months of tortuous negotiations between Berlin and General Motors, the announcement [ID:nLA668553] will be a relief for Merkel who has stood firm in strongly supporting Magna's bid, backed by a Russian state-owned bank, said analysts.

Even if she fails to win many votes on the back of the Magna deal because her Social Democrat (SPD) coalition partners and election rivals also favored Magna, her image as a leader who held her ground and fought for German interests looks enhanced.

"It is a positive for Merkel," said Gerd Langguth, a political scientist at University of Bonn and Merkel biographer.

"Her coalition with the SPD has had a political success just before the end of its term and any achievement for a 'grand coalition' always favors the chancellor, not the junior partner," he said.

Polls show Merkel is on track for re-election but it is unclear if she will be able to form a coalition with her desired partners, the pro-business Free Democrats (FDP) or whether she will end up in coalition again with the SPD.

The deal with Magna, also backed by Opel's German workers, is not yet done as GM has attached conditions to a sale, including limits on the transfer of technology to Russia, according to a German coalition source.

But Merkel said the conditions were manageable and that the GM board's recommendation offered Opel a new beginning.

"The government's patience and purpose has paid off. It was not an easy path," Merkel told reporters.

STRONG STANCE

She took an uncharacteristically strong stance early on in the talks with GM and promised 4.5 billion euros ($6.6 billion) in government guarantees if GM opted for Magna whose main rival was Brussels-listed investor RHJ International (RHJI.BR).

Merkel was intent on avoiding the prospect of mass layoffs among Opel's 25,000-strong German workforce in its four plants here, before the September 27 election -- if necessary at the expense of other nations.

The future of some of Opel's other plants in Europe, including one in Antwerp, Belgium, was uncertain on Thursday.

The stakes for Merkel rose last month when fears arose that GM, whose decision to sell Opel was linked to its bankruptcy filing, might opt to keep the firm after all.

Germans balked at this prospect. They blame the U.S. firm for mismanaging the venerable Opel brand in the last few decades and letting rivals such as Volkswagen overtake it.

"If GM had kept Opel, it would have been against the government's wishes and tensions could have mounted between the German government and the United States which would have reflected badly on Merkel," said Peter Loesche, emeritus political scientist at Goettingen University.

But it is unlikely Merkel will win a significant number of votes because of the political consensus behind the Magna offer.

"Both coalition parties were pulling together and both will claim victory," said Loesche.

Like Merkel, her SPD rival Foreign Minister Frank-Walter Steinmeier held rallies in Opel plants and although his party is trailing the conservative camp by more than 10 percentage points, workers still tend to vote SPD, said analysts.

Loesche added, however, the decision could reinforce the view that economic management is a strength for Merkel's party.

"Overall, the election looks as if it will be decided on economic management and that strength is broadly perceived to lie with Merkel's conservatives," said Loesche.

(Editing by Louise Ireland)