BERLIN May 14 Angela Merkel is looking
increasingly isolated at home and in Europe after what she
called a "bitter, painful defeat" for her party in a weekend
election in Germany's most populous state.
The German chancellor said the vote did not change her view
that fiscal rigour was the best path for Europe, although it
highlighted resistance among Germans to enduring the kind of
austerity she has forced on debt-laden southern nations.
Merkel will have to contend with a more aggressive
opposition and less compliant allies with the setback for her
Christian Democrats (CDU) in North Rhine-Westphalia on Sunday at
the hands of the centre left Social Democrats (SPD).
And France's new Socialist President Francois Hollande is
expected to press for new steps to boost growth in Europe, where
many countries are struggling with recession and rising
unemployment, when he meets Merkel in Berlin for the first time
"It does not affect the work we have to do in Europe,"
Merkel said on Monday when asked about the impact of the NRW
vote on her policies.
Nobody in her government opposed growth, she said, but the
question was the impact of stimulus measures on the budget.
The CDU's campaign for the state vote focused on cutting the
state's 180 billion euro debt mountain against Social Democrat
plans for a slower approach to budget consolidation, but it was
also a personality battle that the CDU lost.
"Yesterday was a bitter day, it was a bitter, painful
defeat," Merkel said after results showed the SPD won 39.1
percent against 26.3 percent for the CDU.
Despite the growing austerity backlash, people close to
Merkel have signalled that she has no intention of making big
concessions to Hollande, beyond agreeing to a form of "growth
pact" containing modest steps long under discussion in Brussels.
German officials, including Finance Minister Wolfgang
Schaeuble, have suggested over the past week that they could
tolerate higher inflation at home to help compensate for
deflationary tendencies in Europe's southern periphery.
But they are ruling out stimulus measures that would raise
debt levels. One senior aide to the chancellor told Reuters on
condition of anonymity that she was "willing to talk about
intensified growth and employment strategies" but only as long
as they didn't involve new deficit spending.
One possible area of compromise is on deficit targets for
euro zone weaklings, even if German officials have said
repeatedly in recent weeks that there is no wiggle room here.
Most EU governments, the European Commission and the
International Monetary Fund (IMF) now believe that some
countries, notably Spain, will need more time to reduce their
"Merkel will find it hard to resist them all," said Charles
Grant, director of the Centre for European Reform in London.
Germany's Social Democrats (SPD), emboldened by Hollande's
victory and their big win in NRW, are demanding new
growth-boosting steps to complement the German-led European
SPD chairman Sigmar Gabriel said the state election had
taught the party the value of being "combative and engaged".
Merkel needs the SPD's support to push her fiscal compact
through parliament, but said on Monday that she would not engage
with her rivals until after an informal May 23 summit in
The so-called "troika" of SPD leaders - Gabriel, Peer
Steinbrueck and Frank-Walter Steinmeier - have scheduled a news
conference for Tuesday morning, hours ahead of Hollande's
arrival, to set out their demands.
A day after the regional setback, Merkel also had to contend
with pushier partners within her own coalition.
A surprisingly strong showing for her federal partners, the
Free Democrats (FDP), in NRW has reinforced the idea among the
party leadership that only by standing to Merkel can they hope
"If we don't yield but stick to our stance no matter how
much pressure is on us, we will succeed in the end," said FDP
chief and economy minister Philipp Roesler.
Horst Seehofer, head of the Bavarian Christian Social Union
(CSU) - the third party in Merkel's centre-right coalition - has
also signalled he is fed up with the chancellor's party after
weeks-long infighting over childcare and data retention
The CDU's rout was widely blamed on its candidate in NRW
Norbert Roettgen, Merkel's environment minister, who riled
voters by refusing to commit to lead the opposition in the state
in the event of a loss.
On Monday he tried his best to deflect blame for the
battering away from Merkel.
"This was a total, comprehensive, clear defeat that we
suffered, but it was also my defeat," Roettgen said.
"Above all this is the fault of the lead candidate, me, the
themes I set, my style of campaign. I haven't only taken
responsibility, but I believe this was my responsibility."