Snap Analysis: German state vote weakens Merkel

BERLIN Sun May 9, 2010 2:25pm EDT

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BERLIN (Reuters) - Germans punished Chancellor Angela Merkel's center-right coalition in a regional election on Sunday, depriving her of a majority in parliament's upper house after she angered many voters by agreeing to aid Greece.

Here are some of the main implications of the closely watched election in North Rhine-Westphalia (NRW), Germany's most populous state, for Merkel and policy in Europe's biggest economy:

IMPACT ON MERKEL'S AUTHORITY

* The outcome is a personal blow for Merkel, especially after criticism of her handling of the Greek crisis and public anger over a multi-billion euro aid package, including 22.4 billion euros worth of loans from Germany. The vote was seen as a referendum on Merkel's six-month-old center-right coalition, comprising her Christian Democrats (CDU) and Bavarian Christian Social Union (CSU) and the pro-business Free Democrats (FDP).

* It could give ammunition to her political foes who have attacked her for a lack of leadership in the Greek debt crisis and say her hesitation and reversals have undermined Germany's standing in the European Union.

* Discontent with Merkel's leadership style may grow within the conservative camp but there is no obvious challenger and her position as leader still looks safe.

IMPACT ON POLICY

* Merkel's center-right coalition will lose its automatic majority in the Bundesrat, the upper house of the federal legislature.

Merkel will have to rely on opposition support to deliver flagship policies, including tax cuts, health reform and the extension of the lives of some nuclear plants, which will delay efforts to get these measures through. Europe's biggest economy is therefore heading for a period of policy stagnation.

* Germany's upper and lower houses of parliament have backed the Greek aid package so the NRW vote has no bearing on it.

IMPACT ON WORKING OF COALITION

* Tensions within the ruling coalition are likely to heighten as both sides blame each other for the defeat. This could slow down decision-making within the coalition on crucial issues, especially tax cuts.

* The poor showing of the FDP compared to their performance in September's federal election is likely to undermine their position in the coalition and could curb the influence of FDP chief and Foreign Minister Guido Westerwelle, who is already suffering from low personal ratings in opinion polls.

IMPACT ON OPPOSITION PARTIES -- SPD, GREENS, LEFT

* The Greens, who saw their support rise by more than 6 percentage points, are the big winners.

* Overall, the result gives a much-needed boost to the opposition camp which also includes the Social Democrats (SPD), still struggling after their worst election performance since World War Two in last year's federal vote. The SPD and Greens will argue the result could signal a shift in voters' attitudes which have for much of the last decade been moving in favor of the conservative camp.

* It also boosts the far-left Left Party, which has become a political force in the last couple of years.

IMPACT ON STATE COALITION IN NRW

It is unclear whether the opposition SPD or the CDU will end up leading the state government and what the coalition will look like.

* A "grand coalition" between the CDU and SPD would boost the SPD federally. A more assertive SPD could seek to block Merkel's policy plans. If early projections that put the SPD just ahead of the CDU are borne out, the SPD could lead the coalition.

* It is unclear whether the SPD and Greens have won enough votes to form a two-way coalition. That option would be a heavy blow to Merkel and the FDP and a major psychological boost for the SPD and Greens. It would make them a more formidable force against Merkel at the national level, where they governed from 1998 to 2005 under Chancellor Gerhard Schroeder.

A three-way partnership between the SPD, Greens and the Left party would set a precedent in western Germany which would be very divisive for the SPD. Many in the SPD loathe the Left party, which comprises some former East German communists and some disillusioned SPD members, for deserting their ranks.

* A coalition between the CDU and Greens could serve as a model for possible future federal governments. However, some more conservative and business-oriented members of Merkel's party are fiercely against it due to policy differences. Energy policy, especially the CDU's commitment to extending the lives of some nuclear power plants, would be extremely problematic.

(Editing by Mark Trevelyan)

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