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Merkel’s FDP Allies Bash Euro Bailouts to Sharpen Profile

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Free Democratic Party Chairman Philipp Roesle
Philipp Roesler, chairman of Germany's Free Democratic Party and minister of health, has been charged with reviving party fortunes after it suffered successive routs in the four state elections so far this year. Photographer: Johannes Eisele/AFP/Getty Images

May 13 (Bloomberg) -- German Chancellor Angela Merkel’s Free Democratic allies are threatening to impose more conditions on future euro-area bailouts as they seek to tap voter anger over granting aid to reverse the party’s collapse in support.

Delegates at a party convention in the Baltic Sea port of Rostock will debate a motion on the euro tomorrow that says “in no case whatsoever” can Germany assume the debts of other countries and demands investors share the bill for any aid given to indebted states. At least 14 of the FDP’s 93 lawmakers say they will vote against any further aid for Greece.

“We’re at a crossroads,” Otto Fricke, the FDP’s budget spokesman in parliament, said in an interview. “We need to show we’re the other voice in the coalition and that may mean taking a tougher stance on the debt crisis where necessary.”

The FDP threat to resist bailouts adds to Merkel’s dilemma as she confronts a resurgence of the crisis where it started, Greece. Just as she held out for months before aiding Greece a year ago, the chancellor is again refusing to tip her hand, leaving a policy void that the Free Democrats can exploit.

Greek two-year notes rose to a record 26.77 percent yesterday as Merkel and fellow European leaders failed to allay concern that the Greek government will have to restructure its debt. The two-year yield was 24.99 percent today.

Eighty-five percent of international investors surveyed by Bloomberg this week said Greece will probably default on its debt. Euro-region finance ministers are due to meet in Brussels on May 16 to discuss additional support for Greece.

‘Badly Wrong’

“A good many Free Democrats share the view in private that something is going badly wrong in solving this crisis, that we are heading full speed toward creating a permanent system of transferring aid to the currency area’s periphery,” Frank Schaeffler, an FDP lawmaker who last year called for Greece to sell its islands to cut debt, said in an interview. “A year ago I was isolated in the party, but that’s no longer the case.”

Schaeffler heads a group of 14 lawmakers who will ask the party’s 662 delegates in Rostock to support a motion calling for the ejection of states from the euro “at short notice” in cases of rule breaking. The group also say they will reject any vote in parliament on additional bailout aid.

Another six lawmakers from Merkel’s Christian Democrats will join them, potentially making the chancellor reliant on opposition support to pass aid, the Handelsblatt newspaper reported today. While Schaeffler said his FDP motion has little chance of being passed, “that doesn’t mean we won’t be heard.”

Vein of Resentment

The bailout skeptics aim to tap a vein of resentment in Germany. Twenty percent of Germans view Merkel’s decision to help Greece in May 2010 as “right,” according to a poll published May 8 by consumer survey company GfK SE. Another 47 percent of respondents said the decision was “wrong,” suggesting that Merkel’s coalition may struggle to justify potential new aid.

The Free Democrats, who won a record 14.6 percent in the September 2009 federal election to enter government as one of three coalition parites, have seen their ratings tumble to historic lows amid bickering over policy, an unpopular leadership and failure to deliver their core policy of tax cuts.

The party was further shaken this week by the resignation from all political office of Silvana Koch-Mehrin, a vice-president of the European Parliament, amid accusations of plagiarism in her doctoral thesis.

Merkel Frustrated

The collapse of the FDP’s support threatens to deprive Merkel of a viable coalition partner, frustrating any desire she may have to run for a third term in 2013. The party’s poor showing in March state elections contributed to the Christian Democrats losing their 58-year grip on Baden-Wuerttemberg, home to Daimler AG, Porsche SE and SAP AG.

Philipp Roesler, 38, has been charged with reviving party fortunes after successive routs in the four state elections so far this year. A fifth will take place in the city-state of Bremen on May 22.

Roesler, a doctor by training who was health minister before replacing Rainer Bruederle at economy, was today elected party chairman. He takes over the FDP leadership from Foreign Minister Guido Westerwelle, who said last month that he wouldn’t stand again after 10 years in the post. He intends to remain foreign minister. Roesler will address delegates tomorrow.

The change in personnel has yet to register in the party’s poll ratings. Support for the FDP rose one percentage point from May 5 to 5 percent, the threshold for seats in parliament, an Infratest poll for ARD television showed today. While Merkel’s CDU remained the strongest party with 33 percent backing, the ruling coalition trails the opposition Social Democrats and Greens by 38 percent to 48 percent.

The party of Hans-Dietrich Genscher, the foreign minister who oversaw German reunification in 1990 after the fall of the Berlin Wall, “won’t garner points by fanning anti-euro sentiment,” said Hans-Juergen Hoffmann, head of the Psephos polling company. “That’s not credible from a party that has so long been an advocate of European unity,” Hoffmann said by phone. “The FDP is in deep trouble.”

To contact the reporter on this story: Brian Parkin in Rostock, Germany at bparkin@bloomberg.net

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

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