Merkel’s One-Time Ally Steinbrueck Set to Be Her 2013 Challenger

Germany’s opposition Social Democrats chose Peer Steinbrueck, a chess-playing former finance minister, as their candidate to challenge Chancellor Angela Merkel in 2013 elections.

Steinbrueck, 65, who served for four years in Merkel’s first-term government, was selected after Frank-Walter Steinmeier, a former foreign minister who lost to Merkel at the last election in 2009, dropped out of the running. Steinbrueck will be nominated at a special sitting of the SPD executive board on Oct. 1, Chairman Sigmar Gabriel told reporters today in Berlin. The decision was made two weeks ago, he said.

Once Steinmeier made clear that he didn’t want to run, “we agreed that, given the time available to us and given the issues that face us, perhaps I could draw the maximum support possible for the SPD,” Steinbrueck said at the same event.

With the elections due to be fought on Merkel’s handling of the euro-area debt crisis, Steinbrueck has been touted in party circles as having the best chance of defeating her. As far back as May last year, former SPD Chancellor Gerhard Schroeder said in an interview that Steinbrueck would be a “very good candidate” and there’s “no question” he’d campaign for him.

This is a “very reasonable decision” by the Social Democratic leadership, Jan Techau, director of the European Center of the Carnegie Endowment for International Peace in Brussels, said in an e-mail. “The campaign will be a lot more interesting than in 2009.”

Banking Proposal

Steinbrueck has already begun raising his profile. He unveiled a proposal this week for German banks to split their investment-banking operations from retail units to protect depositors. Deutsche Bank AG co-Chief Executive Officer Anshu Jain responded that Germany’s biggest bank is still committed to the so-called universal banking model.

While the SPD trails Merkel’s CDU/CSU bloc by between four and 12 percentage points in the six regular opinion polls, the weakness of Merkel’s Free Democratic coalition partner means she may not be able to count on a continuation of her present constellation.

Polls show neither her current coalition nor Steinbrueck’s SPD and its traditional Green Party ally have enough support to form a government. That has prompted speculation that a rerun of her first-term grand coalition with the SPD is the most likely outcome. No date has been set for the vote due in the fall.

Hypo Real

Steinbrueck served as Merkel’s finance minister at the onset of the financial crisis in 2008. He stood beside her in the Chancellery on Oct. 5 of that year to announce the government would guarantee bank deposits to avoid a panic after the near-collapse of Hypo Real Estate Holding AG.

Merkel “worked very closely” with Steinbrueck during her first term, her chief spokesman, Steffen Seibert, told reporters today when asked to comment on a story in Bild newspaper that Steinbrueck was planning to face her. Even so, she “has no preference as far as her opponent is concerned.”

“It doesn’t matter to us which SPD man loses to Merkel,” Hans Michelbach, a lawmaker from Merkel’s CSU Bavarian sister party, said in an e-mailed statement.

‘Seventh Cavalry’

A former prime minister of Germany’s most populous state, North Rhine-Westphalia, Steinbrueck accelerated efforts to stop German tax evasion to Switzerland and sought to force the revelation of names of account holders and provide access to information. He threatened to put Switzerland on the Organization for Economic Cooperation and Development list of non-cooperative countries.

At the time, he equated the move to “having the Seventh Cavalry in Fort Yuma that can be ordered to ride out but doesn’t have to” do so. “The important thing is the Indians know it exists.”

Steinbrueck’s role in Merkel’s Cabinet from 2005 to 2009 earned him political enemies. The anti-capitalist Left Party reacted to news of his candidacy by saying that he was responsible for spurring poverty among the elderly.

Within his own party, he lacks a political base, meaning that “internal SPD cohesion will remain a huge problem,” Techau said. “Steinbrueck’s batallions are small and weak. For the party, he is a candidate of the head, not of the heart.”

To contact the reporter on this story: Alan Crawford in Berlin at acrawford6@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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