Merkel Looks for Election Boost in Volkswagen's Home State

  • Lower Saxony vote has held up talks on next German government
  • Merkel’s CDU, victorious but weakened, in tight race with SPD

Angela Merkel on Oct. 13.

Photographer: Carmen Jaspersen/AFP via Getty Images

Chancellor Angela Merkel’s party faces a neck-and-neck election Sunday in Volkswagen AG’s home state that will set the stage for difficult talks on forming her next national government.

Three weeks after winning re-election with diminished voter support, Merkel heads into the vote in Lower Saxony with polls suggesting a late surge for her party’s Social Democratic opponents, who have governed the region since 2013. Failing to flip the state would deprive Merkel’s Christian Democratic Union of a confidence boost just before she begins coalition talks with the Free Democratic Party and Greens on Wednesday.

For an interactive look at German coalition options, click here.

As the CDU’s poll lead faded over the past six weeks, VW’s cheating on diesel emissions became a campaign theme. Merkel’s candidate, Bernd Althusmann, went on the attack by saying he’d turn over one of the state’s two supervisory-board seats at VW to an outsider. That was rebuffed by incumbent Stephan Weil, who says the cheating, which came to light two years ago, originated long before he became state premier in 2013.

“Today, I’m much more optimistic, though the overhaul at Volkswagen -- most of all a different corporate culture, a different attitude -- is by no means complete,” Weil said in a ZDF television interview.

Merkel has pledged to keep diesel cars on German roads for years yet and rejected a suggestion in a newspaper interview this week that Lower Saxony give up its 20 percent voting stake in VW, which would address investor concern about the scandal and reduce political influence over the automaker. That same love of stability may make voters stick with Weil on Sunday.

Read more: Bloomberg Intelligence research primer on Volkswagen

Should the CDU pull off a victory in Lower Saxony and oust the SPD government, “she would diffuse any negative sentiment within her party,”  Carsten Nickel, an analyst at Teneo Intelligence in Brussels, said in a note.

A weak CDU showing, by contrast, may add to pressure on Merkel from her party bloc to take a more conservative line in the coalition talks after having lost voters to the anti-immigration Alternative for Germany party, or AfD. In last month’s national vote, her CDU-CSU bloc fell to its worst result since 1949.

Eye on Berlin

The Green party, which has been Weil’s junior coalition partner, and the Free Democrats will also be looking to Lower Saxony, a state of 7.8 million on the Dutch border, as a gauge of strength before the talks in Berlin on a forming an unprecedented four-party government.

Merkel put those negotiations on hold pending the Lower Saxony vote and stayed in campaign mode, addressing a string of CDU rallies in the state.

Weil called an early election in August when a Green lawmaker’s defection to the CDU cost his coalition its one-seat majority in the state legislature. At that point, Merkel’s party appeared well-placed to win the state, but it’s now polling below the 36 percent it won in 2013.

While an extension of the state’s SPD-Green coalition appears out of reach, Weil could try to govern by adding the resurgent Free Democrats to the mix if he wins another term.

Once the state election is over and party leaders sit down for exploratory talks to form a national government, they have an obligation to voters to “hunker down and see what we can do,” Merkel told a labor meeting on Thursday in Hanover, the state capital.

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