March 26 (Bloomberg) -- German Chancellor Angela Merkel’s party won a regional ballot in the western state of Saarland, the first electoral test of her crisis-fighting policy since she persuaded European leaders into a pact to limit budget deficits.
Merkel’s Christian Democrats are set to return to power in Saarland, a former coal-and-steel state that borders Luxembourg and France, at the head of a so-called grand coalition with the main opposition Social Democrats after yesterday’s election. Her Free Democratic Party ally crashed out of the state assembly after taking its worst share of the vote in more than 50 years.
Saarland is the first of three state ballots in eight weeks that offer a snapshot of Merkel’s crisis handling and chances of winning a third term in federal elections due in 2013. As she signals the worst of the crisis may be over, the result marks an end to the run of defeats suffered by her CDU since May 2010 that party officials blamed on voter anger at aiding Greece.
“However small Saarland is on the electoral map, this result will be booked by Merkel as a confirmation of her policies,” said Carsten Brzeski, an economist at ING Groep in Brussels. Her party now enjoys a “tailwind” for the two bigger state votes due in May, and Merkel will back a Saarland grand coalition to send a signal of her intentions “should such a constellation repeat itself in the federal vote” next year.
Merkel is due to hold a press conference on the election result at 1 p.m. in Berlin.
The CDU took 35.2 percent to remain the biggest force in Saarland, while the Social Democrats came second with 30.6 percent, preliminary results showed. The anti-capitalist Left Party led by Oskar Lafontaine, the state’s former prime minister, took 16.1 percent.
Saarland, which represented 1.2 percent of German gross domestic product in 2010, the smallest proportion of any state except the city of Bremen, held elections more than two years early after Annegret Kramp-Karrenbauer, the CDU state premier, dumped the Free Democratic Party in January out of a government that also comprised the Greens. The FDP, Merkel’s national coalition partner, got 1.2 percent, well below the 5 percent threshold needed to return Liberal seats in Saarbruecken.
The Greens took 5 percent while the Pirate Party, which campaigns for open internet access, had 7.4 percent, allowing it to enter a second regional parliament after winning seats last year in Berlin’s state assembly. While the Social Democrats and Left won enough seats to form a coalition, Heiko Maas, the SPD state leader, ruled out such an alliance in favor of a coalition with Kramp-Karrenbauer.
“The CDU has been given a clear mandate to form the government” in Saarland, Peter Altmaier, the majority whip for Merkel’s party in Berlin, said on ZDF television. The result “is a vote of confidence in Angela Merkel’s policies” and “will give new impetus to the federal government.”
Outside of the Saarland, the Social Democrats were able to claim a success after their candidate, Peter Feldmann, was voted in as mayor of Frankfurt in elections also held yesterday. Feldmann took 57 percent to 42 percent for Christian Democrat Boris Rhein in the direct vote, winning control of Germany’s financial capital after 17 years of Christian Democratic rule.
Saarland sets the stage for two more state elections this year that offer the latest indication of voter sentiment in Europe’s largest economy. Next up is Schleswig-Holstein on May 6, then North Rhine-Westphalia, Germany’s most populous state, which votes on May 13 after the government collapsed this month.
With almost a quarter of Germany’s 82 million people, North Rhine-Westphalia is a bellwether for federal political fortunes. The SPD took the state from Merkel’s party in May 2010 in a result Merkel blamed on agreeing days earlier to a first bailout for Greece. The vote deprived her of a majority in the national upper house, where states are represented, and presaged defeats or a loss of support for her coalition parties in all seven state votes in 2011.
Merkel’s approval ratings have since risen this year to the highest level since her re-election in 2009 as she pushed for fiscal austerity across the euro area while swinging Germany behind a second bailout for Greece to keep the currency union from splintering. Leaders of 25 of the 27 European Union countries signed the German-inspired fiscal pact on March 2.
As Merkel won back support, her Free Democratic coalition ally has slumped from a record 14.6 percent in the last national election in 2009 to as low as 2 percent in Germany-wide polls.
The Free Democrats led nationally by Philipp Roesler, the economy minister and vice chancellor, can now add Saarland to the list of five state assemblies that it crashed out of last year. Polls suggest that it will fail to win seats in either Schleswig-Holstein or in North Rhine-Westphalia, known as NRW.
The Free Democratic result in Saarland “is very worrisome for the party but also for the coalition in Berlin,” Brzeski said by phone. “If the FDP fails to qualify for parliament in the state of NRW -- a state in a different league to Saarland -- then it’s curtains for its current leadership.”
Saarland, which still produces steel, was Germany’s third most-indebted region on a per capita basis at the end of 2010 after the city-states of Bremen and Berlin, according to the Federal Statistics Office.
Merkel, who paid several campaign visits to the state, was rewarded by victory even as Saarland struggles to meet Germany’s so-called debt brake, which forces states to balance their budgets. The debt brake is the model for Merkel’s fiscal pact.
“Chancellor Merkel really backed me up in this election and the result is also in part her victory,” Kramp-Karrenbauer said on ZDF.
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