* Steinbrueck winner of 3-way contest to take on Merkel
* Former finmin taking tough line on banks
* Combative veteran ruled out another grand coalition
By Stephen Brown and Erik Kirschbaum
BERLIN, Sept 28 Peer Steinbrueck, an abrasive
former finance minister, will lead the German Social Democrats'
challenge to unseat chancellor Angela Merkel in a parliamentary
election a year from now.
Announcing their "chancellor candidate" some months earlier
than expected, the centre-left opposition took Germany by
surprise on Friday; Steinbrueck, a combative veteran from the
right of the SPD, marked out a campaign theme of tougher rules
for banks and a goal of coalition government with the Greens.
Analysts saw his rapid emergence from a three-way struggle
within his party as the outcome most threatening to Merkel,
though polls show the conservative leader still well ahead.
Steinbrueck led Germany's response to the global economic
crisis while serving as finance minister in Merkel's first
government, a grand coalition from 2005-09. But the 65-year-old
dismissed talk of forming another left-right pact, however the
parties fare in a vote for the Bundestag due by October 2013.
"We want to oust this government. We want to make sure it
isn't just partially replaced but completely replaced with an
SPD-Greens government," he told a news conference, referring to
the ecologist party currently ranked third in opinion polls.
The path was cleared for Steinbrueck's candidacy after two
other SPD contenders, party chairman Sigmar Gabriel and former
foreign minister Frank-Walker Steinmeier, stepped aside.
The election is no presidential style face-off but is fought
by parties for parliamentary seats on the basis of proportional
representation. However, the two traditional big parties set the
tone for their campaigns according to their choice in advance of
who will lead a government if they win a legislative majority.
Known for a quick wit and acerbic tongue, Steinbrueck is
likely to mount much sharper attacks on Merkel than the more
diplomatic Steinmeier and could also siphon away votes from her
Christian Democrats (CDU) because of his centrist economic views
and reputation as a safe pair of hands.
"Steinbrueck is definitely the most dangerous candidate
because he appeals to the voters in the middle," said political
scientist Gero Neugebauer at Berlin's Free University.
But a poll by Politbarometer released on Friday showed much
higher personal support for Merkel. The 58-year-old chancellor,
whose reputation has been much enhanced in the euro crisis, had
a 53 percent approval rating versus Steinbrueck's 36 percent.
Merkel's spokesman Steffen Seibert said the chancellor has
"no preference for who runs against her" in the 2013 campaign.
A native of the rich northern port of Hamburg and once prime
minister of Germany's most populous state, the western
industrial powerhouse of North Rhine-Westphalia, Steinbrueck has
never won a major election. He took over as state premier in
mid-term. And, at the federal level, it was Steinmeier who was
the SPD candidate against Merkel in 2009. He suffered a crushing
defeat in which the SPD vote hit a postwar low of 23 percent.
The outspoken Steinbrueck has vowed that he will never again
serve in a Merkel cabinet. He seems likely to resist a revival
of the grand coalition, in which the SPD was junior partner - an
experience which saw the party's popularity ravaged.
TAKING ON THE BANKS
Steinbrueck's launch this week of proposals for tough new
restrictions on the banking sector have mollified some critics
on the left wing of the SPD.
"Steinbrueck has taken a big step in our direction by being
very bold in taking on the powerful and aggressive bank lobby,"
said Ernst Dieter Rossmann, a leader of the SPD left in the
Bundestag lower house. "He's got our full support on that."
As Germany's oldest active party celebrates its 150th
anniversary next year, it stands at around 26 percent in opinion
polls compared with 38 percent for the Christian Democrats.
But the poor standing of Merkel's centre-right partners,
the Free Democrats who are languishing at 4 percent, may force
her to seek another coalition partner - possibly into an
alliance with the SPD or, somewhat less likely, with the Greens.
The SPD insists its goal is to lead the next government with
the Greens. Together they score about 43 percent in polls and
would need about 47 percent of the vote to form a parliamentary
majority. Parties with less than 5 percent get no seats at all.
Steinbrueck hopes to tap into public anger at banks'
perceived recklessness and culpability for the financial crisis.
"This is not about destroying the financial system, rather
it is about stabilising it and preventing future excesses, and
preventing any repeat of what we have seen in the past few
years," he said when presenting his banking plan this week.
If Steinbrueck wins office he would seek a special bailout
fund for banks, financed by banks themselves so that taxpayers
no longer have to rescue the financial sector.
In proposals criticised by Deutsche Bank, he also
wants to separate banks' retail and investment banking
operations in order to safeguard household depositors' money.
The pro-euro SPD has supported Merkel's response to the euro
zone crisis but Steinbrueck favours even deeper integration in
Europe, such as common debt issuance in the currency bloc. This
is firmly opposed by Merkel and unpopular with many Germans.
Steinbrueck, endorsed by both living former SPD chancellors
- Helmut Schmidt and Gerhard Schroeder - is a straight talker
with a record of verbal clashes, at home and abroad. The Swiss
took exception to him likening them to "Indians" fleeing the
cavalry during a row about tax havens. And current finance
minister Wolfgang Schaeuble responded to his heckling in
parliament last year by telling him to "learn some manners".
A senior official who knows him well said: "Steinbrueck says
what he thinks. Ninety percent of the time it's a strength.
"The other 10 percent it gets him in trouble."
It is unclear he will change his style to lead the campaign.
An avid chess player, Steinbrueck once said of his style on the
board: "I often play very impulsively."