By Stephen Brown and Madeline Chambers
BERLIN, May 15 (Reuters) - Germany’s centre-left opposition told Angela Merkel it would only support her fiscal pact if it was accompanied by measures to boost growth and jobs, siding with France’s new Socialist President Francois Hollande hours ahead of his visit to Berlin.
Markets and policymakers are watching the dialogue between Germany’s conservative chancellor and the new French leader for signs that they can overcome their differences on Merkel’s drive for austerity.
Merkel has put more focus on the need for growth measures in the euro zone since Hollande’s election, but insists no measures can be taken that raise new sovereign debt in Europe. She is calling for structural reform in struggling euro states, such as labour market deregulation, to make them more competitive.
“That is not our definition of growth nor that of the Socialists in France,” said the Social Democrat (SPD) chairman Sigmar Gabriel.
Merkel has so far been able to count on the SPD and their Green allies for support in parliament on euro zone emergency measures such as the Greek bailouts, when some eurosceptic elements of her own centre-right coalition rebelled.
But with German federal elections next year and Merkel seen seeking a third term, the SPD has been emboldened by Hollande’s victory on an anti-austerity platform. The party got a huge boost from an election victory in North Rhine-Westphalia state on Sunday, when Merkel’s party was routed.
Merkel needs opposition help to get the fiscal pact through parliament because laws affecting Germany’s sovereignty and the constitution require a two-thirds majority in the Bundestag (upper house) and the Bundesrat (upper house). [ID:nL5E8E307Y}
The SPD and the Greens are unlikely to torpedo the bill, knowing this would plunge the euro zone even deeper into crisis. But the SPD troika ruled out voting on it in the Bundestag as early as May 25 as the chancellor wanted.
“The government has to realise in the end that this is completely unrealistic,” said former foreign minister Frank-Walter Steinmeier.
The SPD lined up its leadership “troika” - Gabriel, Steinmeier and former finance minister Peer Steinbrueck - to put pressure on Merkel before she meets Hollande at 6.30 pm (1630 GMT).
Their stark message was that Merkel could not take their support for granted to approve her fiscal pact - agreed by 25 European Union countries but still awaiting ratification in most national parliaments - without accompanying measures for growth.
“In any case we will have to look at the result of these negotiations and then we will decide how to vote,” Steinmeier told a news conference of the SPD troika, who are all contenders to challenge Merkel for the German chancellorship next year.
The SPD leaders provided no concrete proposals for growth, beyond what governments are already discussing: boosting the European Investment Bank to inject credit, tapping unused EU structural funds for infrastructure projects, and pushing for a European financial transaction tax.
But they pinned the blame on Merkel and her erstwhile French ally, conservative former president Nicolas Sarkozy, for a focus on austerity that they said had contributed to high unemployment among young Europeans that threatened the continent’s stability.
“Misery gnaws away at democracy,” said Steinbrueck, who like Steinmeier served in Merkel’s first “Grand Coalition” government with the SPD from 2005-2009.