Sense of dread as German SPD eyes new Merkel coalition
* German centre left heads into Merkel-led government
* Grassroots SPD supporters to vote on coalition deal
* Congress reflects fears SPD will lose more support
LEIPZIG, Germany, Nov 15 (Reuters) - If you want to know how rank-and-file Social Democrats (SPD) regard the prospect of another 'grand coalition' government under Chancellor Angela Merkel, look for the red hedgehog.
Listening to speeches at a party congress in Leipzig from a stand emblazoned with their cute logo, four members of the "Over 60s Working Club" from the northern town of Schortens summed up grassroots sentiment in one word: scepticism.
"We don't need a repeat of the last coalition," said Holger Krahe. The SPD's reward for a 2005-2009 alliance with Merkel's conservatives was their worst election result in the post-war era - 23 percent. They only improved on that score by a few points in this September's election.
Now the SPD is on the verge of repeating what many in the party believe was a colossal mistake. From local activists like Krahe to senior figures in the party, the mood here was a mix of resignation and dread.
"You can't talk with the conservatives about what Germany will be like in 10 years' time. They're not interested," said one SPD heavyweight who may end up in Merkel's cabinet.
Chairman Sigmar Gabriel held onto his job but his lukewarm reelection in Leipzig was a message from the 600 delegates, and nearly half a million card-carrying members whom they represent, to put the party's interests first in negotiations with Merkel.
The chancellor, reelected for a third term in September but short of her own majority, wants a government by Christmas.
Her Christian Democrats and their Christian Social Union partners from Bavaria have set up 12 working groups with the SPD to seek compromises on a mind-boggling range of issues from big-ticket economic and social policies to protection for bees.
Despite some tantrums by SPD negotiators timed to provide headlines for Leipzig, the party has dropped one of its main campaign promises, higher taxes on the rich, and there is slow but steady progress in other areas like how to manage the switch from nuclear energy to renewables.
But the final coalition agreement, which could total 150 pages or more, may end up in the bin if it is not approved by about 470,000 SPD members in a ballot by early December, adding uncertainty to a process that is already trying the patience of Germany's European partners.
This being Germany, where politicians are expected to argue the details of policy rather than just score points in parliamentary debates, SPD members told Reuters they would not decide how to vote until they had read the document.
"I honestly won't know how I'll vote until I've read the coalition agreement," said Rita, a 29-year-old from the SPD youth wing which tends to be more leftist than most of the party.
She was adamant, like most delegates, that the deal-breaker was a legal minimum wage of 8.50 euros per hour across the board. Merkel wants minimum wages to be set by sector, agreed between workers and employers rather than politicians in Berlin. But she may be forced to concede on this point.
Rita, who declined to give her last name, was also agitated by suggestions that the SPD bigwigs' ambitions for cabinet posts were driving the talks.
Party chairman Gabriel, a 54-year-old who was environment minister in the last grand coalition and could get the vice-chancellorship and a major ministry, denied this, telling the party: "Keeping the SPD together is more important than being in government!"
But the senior SPD politician who may join the government said there was no choice: "Everybody knows what the alternative is - a new election and a coalition of conservatives and Greens."
Convinced that members who read the agreement will accede, SPD leaders are more worried about hardliners who dismiss a deal out of hand. Delegates estimated their strength at anywhere from 10-30 percent of grassroots supporters, who could create trouble by mobilising the "no" vote or denying a quorum.
One such person accosted a former minister on a railway platform early one morning to say: "Negotiate what you like, but I won't vote for it."
The SPD has marked its 150th anniversary with merchandising like a bright red SPD toaster with the party logo popping out on a piece of toast - an unfortunate choice, given the election result which confirmed its sharp decline.
Supporters first blamed a clumsy campaign by Peer Steinbrueck, who as a former finance minister under Merkel proved deeply unconvincing to the party's left wing.
But on reflection, they know the reason millions of members have left is the "Agenda 2010" economic reforms launched by SPD chancellor Gerhard Schroeder a decade ago.
They turned the "Sick Man of Europe" into an economy accused of being too competitive. But for a party which won 40 percent of the vote in past decades, on equal footing with the conservatives, the consequences have been disastrous. Many on the left of the SPD, uncomfortable with the reforms, have abandoned the party.
Economists now warn those hard-won gains in competitiveness could be at risk if Merkel cedes too much to the SPD in terms of pay, pensions and infrastructure projects.
"A grand coalition is not justified by big spending but by big reforms," said Joerg Asmussen, a board member of the European Central Bank and SPD member.
But the SPD is looking inwards, flailing right and left to offer supporters some hope that the future holds more in store than subservience to the cocksure conservatives.
Gabriel dangled the prospect of an SPD-led majority in 2017 with the far left - pariahs since German reunification - and the Greens. The SPD, Left and Greens won a majority in the Bundestag, the lower house, in September, but the SPD had ruled out such a partnership before the vote.
Under the sign of the hedgehog, the SPD oldies dismissed the hard left as "blockheads" and ruled out courting small-business voters from the Free Democrats, who bombed out of parliament for the first time after four years with Merkel.
With foreboding, they knew their party was heading for another partnership with Merkel. They may end up winning few big concessions beyond the minimum wage.
"We have to be realistic," said Renate Moegling. "We are the smaller party."
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