UPDATE 1-German opposition leader tells party can unseat Merkel
* Steinmeier favourite to lead SPD against Merkel next Sept
* Rousing speech at party conference attacks coalition
* Says German economy "on borrowed time" amid euro crisis
BERLIN, Sept 15 (Reuters) - Germany's former Foreign Minister Frank-Walter Steinmeier appealed to the emotions of his centre-left opposition party on Saturday with an attack on Chancellor Angela Merkel's coalition and a vow to win back power in next year's election.
Steinmeier, one of three Social Democrat (SPD) leaders jostling to lead the party into the 2013 election, delivered an uncharacteristically rousing speech to 700 SPD officials at a conference, in what sounded like an audition for the top job.
"We're going to fight to win, not for second place," Steinmeier said, dismissing suspicions the SPD would be content as junior partner in another grand coalition with Merkel's conservatives. "We want to lead in a coalition with the Greens, a coalition that will point Germany towards the future."
The SPD will pick a candidate in January to run against Merkel in the election due in September 2013. Steinmeier leads the pack, ahead of SPD Chairman Sigmar Gabriel and ex-Finance Minister Peer Steinbrueck.
Often criticised for a colourless and cerebral style, Steinmeier was full of fight during his hour-long address, drawing enthusiastic applause for bashing Merkel and her squabbling coalition which he said was squandering a solid foundation laid by the last SPD-led government.
"The country is in agony with this coalition," he told the SPD's "Zukunftskongress", or conference on the future.
"Wherever you look they're fighting each other. This coalition has been together for three years but they still haven't formed a working government. They're blowing the headstart for Germany we created for them."
Having ousted Merkel's CDU in three of Germany's 16 state elections in 2011 and 2012, the SPD has said it wants to raise taxes on the rich if it wins back power in 2013.
"They're talking the country into a coma with the same tired line: 'We're in good shape in Germany'," Steinmeier said. "We're glad we're in good shape. But we know we're living on borrowed time and we know that time is slipping away. This government is squandering the head start the last SPD-led government gave it."
Steinmeier was chief of staff in the SPD-Greens government and Chancellor Gerhard Schroeder's right-hand man in the SPD-Greens coalition that led Germany until 2005. Its "Agenda 2010" economic reform programme is widely credited with setting a solid basis for Germany's performance even though the painful measures hurt the SPD at the polls.
Steinmeier was foreign minister under Merkel in the CDU-SPD grand coalition that helped guide Germany through the 2008/09 financial crisis that hit the export-oriented economy hard.
Recent opinion polls show Merkel's conservatives would win about 36 percent of the vote but their Free Democrat (FDP) coalition partners would win only four percent and fail even to clear the 5 percent threshold needed for seats in parliament.
Steinmeier's SPD would win 30 percent and their preferred Greens partners would win 13 percent. But their combined total of 43 percent would likely fall short of about the 47- to 48-percent analysts say is needed to form a parliamentary majority. Many analysts expect a grand coalition as the likely outcome.
Long ambivalent about whether to run against Merkel again, wary of a second drubbing after the SPD got a post-war record low score of 23 percent in 2009, Steinmeier now appears to really want the job.
His main rival, Steinbrueck, who was in Merkel's cabinet as finance minister from 2005 to 2009, said the party needed to regain its confidence.
"Sure, we can talk about the mistakes we made. But we ought to start showing some political body language and explain to people that a lot of what is going well in Germany right now is because of what the SPD did between 2002 and 2009."
Steinbrueck, was a front runner a year ago thanks in part to his appeal to middle-of-the-road voters. But scepticism in the SPD's left wing against him has remained high.
The third candidate, Gabriel, recently signalled he might withdraw from the race. Gabriel, 52, said he wanted to spend more time with his family after the birth of a baby daughter earlier this year.
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