Could heartland victory help Kraft to Berlin?
* Hannelore Kraft turns SPD fortunes around in key state
* Common touch makes her serious rival to Merkel
* State debts may hold her back
By Stephen Brown and Madeline Chambers
BERLIN, May 14 (Reuters) - Her rivals call her Germany's "debt queen", but Hannelore Kraft's victory in a state election at the weekend has driven speculation she could challenge Chancellor Angela Merkel as the mother of a nation famed for its frugality.
Kraft's ready smile and common touch helped her turn around the fortunes of her Social Democrats (SPD) in the May 13 vote in North Rhine-Westphalia (NRW) and she was re-elected premier of Germany's most populous state.
An economist and business consultant whose father was a tram-worker, Kraft has nowhere near the political experience of Merkel, who has been in power since 2005, even though, at 50, she is only seven years her junior.
But she has earned a reputation for political pragmatism, just like the conservative chancellor who will fight for a third term in 16 months' time, and has an earthy charm Merkel lacks.
Kraft gave her victory speech in a disco, not somewhere Merkel would choose, breaking into song and thanking her mother for doing the ironing during the campaign. "To be honest, I am totally kaputt," she told supporters.
On the campaign trail, she mingled with shoppers and chatted about day-to-day concerns, drawing on her own family's experience such as the time when her husband was unemployed.
One tongue-in-cheek campaign poster "Currywurst ist SPD", roughly translated as "Curry sausage - that's the SPD" in reference to the working class delicacy, rams home Kraft's election message - that she is close to ordinary people.
This style contrasts with Merkel, dubbed "Mutti", or "mummy" by German media because of her undisputed grip on power but who often looks stiff when meeting voters face to face.
For two years before Sunday's vote, the personable blonde with a penchant for puzzles and quiz games led a minority state government with the Greens, winning opposition support for school reform, an end to tuition fees and more childcare funds.
Now she doesn't have to.
Playing on her roots in NRW's industrial Ruhr heartland, she developed her image as "Landesmutter", or "mother of the state" which pollsters say went down well with voters.
The SPD won 39.1 percent against 26.3 percent for the CDU.
"Naturally such a convincing result means she could be a candidate for chancellor," said SPD chairman Sigmar Gabriel, who wants to be the SPD's candidate himself and quickly added: "She herself has ruled out that possibility."
Even Merkel paid tribute to Kraft's campaign, telling a news conference on Monday alongside her sorry candidate, Norbert Roettgen: "The SPD's victory was clearly down to their leading candidate so I congratulate them on this success."
Kraft's political priorities - a minimum wage, education reform and boosting NRW's business appeal - are linked to the economy. Yet her biggest vulnerability is fiscal management and that could yet dent any hopes of higher office.
The CDU has homed in on NRW's record debt pile of 180 billion euros and calls Kraft the "debt queen", although the debts were built up over many years.
It is unclear if she will deliver on the state's obligations to cut debt under Germany's new "debt brake" law which is attracting plenty of attention as the euro zone debt crisis continues to bubble.
Her failure to get her 2012 budget plans passed after a court ruled a supplementary budget for 2010 unconstitutional forced her to call an early election and left her exposed to charges of fiscal incompetence.
Opinion polls show a majority of Germans back Merkel's focus on debt reduction abroad and don't want her to soften her stance towards struggling euro partners, but the result in NRW shows there is also much support for Kraft's gentle approach to austerity at home and emphasis on the need for investment.
Kraft, whose name means power or vigour, overshadowed Roettgen, Germany's Environment Minister, who wears small round spectacles and looks more at home in Berlin's corridors of power than on the campaign trail through former mining towns.
He is widely seen as having bungled his election hopes by refusing to commit to staying in NRW even if he loses the vote and created a huge headache for Merkel by saying the election was a referendum on her policies.
Kraft is one of the SPD's most popular national deputy leaders, but some people note the campaign was largely fought on state-specific party politics and say she might not be ready for national politics.
"Kraft is not necessarily a candidate for chancellor," said Klaus Schroeder, a political scientist at Berlin's Free University.
The conservative daily Die Welt cautioned against the view that Kraft could become chancellor in 2013.
"The SPD now thinks it can march back to power with the Greens in 2013. Such optimism is unfounded. Kraft remained below 40 percent and the SPD-Green victory was based on Roettgen's weakenss. Angela Merkel is an opponent of a different calibre."
Sunday's vote gave the SPD, who are trailing the conservatives by up to 10 points nationally, a morale boost and Kraft is now firmly seen as a potential future chancellor.
"In the long term she is a leading light in the SPD, even if she wants to avoid such talk in the state campaign," said Ulrich von Alemann, politics professor at Duesseldorf University.
Kraft's time could come after another stint as NRW premier, he said.
"After serving a full and successful term as premier of such a big state, Kraft could be in a good position to compete against the experience of Merkel."