Euro zone stays on growth road, hitting occasional bump
LONDON Evidence built on Friday that the sturdy improvement in euro zone economic growth touted by the European Central Bank is in place -- albeit with some wobbles.
BERLIN In the consensus-driven world of German politics it is rare for aspiring leaders to campaign openly for the privilege of leading their party into an election. Candidates are anointed behind closed doors, keeping internal rivalries out of public view.
That is why Peer Steinbrueck's push to grab the mantle of his party, the centre-left Social Democrats (SPD), and take on Angela Merkel in the next federal vote in 2013 has stirred up such a peculiar mix of angst and excitement in Berlin.
Until the euro zone debt crisis hit with full force, Merkel seemed untouchable. But with her cautious "step-by-step" leadership in Europe under attack and the euro zone on the brink of fracturing, she is no longer assured of a third term.
Steinbrueck, a 64-year old with a quick wit and combative streak who as finance minister from 2005-2009 led Berlin's response to the global financial crisis, has seized on Merkel's weakness, launching a very public drive - book launch included - to convince Germans, and his own party, that he's the man to beat her.
His message is simple: where Merkel has been hesitant, he would be decisive, bringing the vision and verve that has been sorely lacking in Berlin since the debt crisis erupted.
Voters seem to be paying attention. According to the latest Politbarometer survey for ZDF television, Steinbrueck has leap-frogged Merkel to become the most popular politician in Germany.
Were he to go head-to-head with her, 45 percent of Germans would back him against 42 percent for Merkel, a DeutschlandTrend poll for ARD television showed this month.
"Politics goes in cycles. After Gerhard Schroeder, people wanted someone like Merkel, with less machismo and a bit more reserve," said Frank Decker, a political scientist at Bonn University, referring to Merkel's SPD predecessor.
"After eight years of Merkel they may want someone who slams their fist on the table and isn't afraid to call the shots. Steinbrueck certainly gives people the impression that he would offer clearer leadership."
IMPLICATIONS FOR EUROPE
At a time when some experts predict the euro zone could implode in a matter of weeks, it seems premature to start worrying about a German election that is nearly two years off.
But if the crisis has shown anything, it is that Germany's influence in Europe is greater than at any time since World War Two. If the currency bloc goes up in flames before 2013, the person sitting in the Chancellery in Berlin two years from now will have huge influence over how Europe rebuilds and recovers.
If the euro zone holds together until then, Germany's next leader will have responsibility for keeping it whole and shaping what kind of union it becomes. Put simply, a leadership change in Berlin could have major implications for Europe's future.
As finance minister Steinbrueck, a tall man with sparse, spiky hair that gives him a perpetual just-woke-up look, made a name for himself by speaking his mind and ruffling feathers.
When Nicolas Sarkozy gate-crashed a meeting of euro zone finance ministers in 2007, Steinbrueck took the opportunity to openly criticise his budget plans, infuriating the French president.
In the weeks after the bankruptcy of U.S. investment bank Lehman Brothers in 2008, he drew the ire of Washington by blaming the United States for spawning the financial crisis and predicting the end of its days as a financial superpower.
Perhaps his biggest clash was with Switzerland. During a 2009 drive to root out tax havens, he likened Germany's southern neighbour to "Indians" running scared from the cavalry. The remarks led a member of the Swiss parliament to compare him to the Nazis.
Steinbrueck hasn't let up since leaving the government. He made headlines only a few months ago for loudly heckling his successor Wolfgang Schaeuble during a speech in the Bundestag.
"If you want to become chancellor, you better learn some manners," Schaeuble shot back icily for all to hear.
To get a feel for Steinbrueck, one need look no further than his favourite film "The Deer Hunter", famous for its high-adrenaline Russian roulette scene with actors Robert De Niro and Christopher Walken in a Vietcong prisoner of war camp.
"He is someone who loves to speak frankly, he enjoys provocation," said Baerbel Hoehn, a lawmaker from the Greens who was state environment minister in Steinbrueck's cabinet when he was premier of the western state of North Rhine-Westphalia. "This has advantages and disadvantages."
His strident personality, and his centrist views, have made Steinbrueck a controversial figure within the SPD and convincing colleagues in his own party to back him may prove his biggest challenge.
Traditional leftists are still angry at him for supporting an increase in the retirement age as finance minister. They were horrified at the suggestion in his 2010 book "The Bottom Line" that the SPD should distance itself from unions, tantamount to heresy in a party with strong historical ties to labour.
Others blame Steinbrueck for his role in the ouster of left-leaning former party chairman Kurt Beck in 2008.
The SPD's left wing is engaged in a rear-guard campaign to thwart his candidacy before it gathers more momentum. They make clear in off-the-record chats they would prefer party chairman Sigmar Gabriel or parliamentary leader Frank-Walter Steinmeier to lead them into the 2013 election.
"I don't believe the argument that he's the only one who can win. Steinbrueck fascinates people and has a hard-core fan base, but he also has more opponents than the others," a member of the SPD executive told Reuters, on condition he not be identified.
"With Steinbrueck as our candidate, the question is whether core SPD voters would back the party," he added. "We would see many traditional supporters staying at home and others defecting to the Left or Pirate parties. Our biggest problem isn't stealing conservative voters, it's preventing these defections."
The problem for SPD leftists is that their preferred challengers may have little chance against Merkel.
Gabriel suffers from stubbornly low popularity ratings and Steinmeier, a former foreign minister, holds the ignominious distinction of having delivered the worst result for the party -- 23 percent -- in the post-war era when he took on Merkel in 2009.
Steinbrueck's public lobbying for the top job -- last month he came out with a new book co-authored by former Chancellor Helmut Schmidt -- has put the party leadership in a quandary.
If they opt for another candidate, going against the polls and the wishes of the ageing but still influential Schmidt, who has publicly endorsed Steinbrueck, they leave themselves open to accusations of sabotaging their best chance of victory in 2013.
They would also look out of touch with modern political trends. In neighbouring France, the SPD's leftist counterparts, the Socialists, just staged a fully transparent American-style primary to choose a candidate to challenge Sarkozy next year.
An SPD party congress next week in Berlin, when Steinbrueck, Gabriel and Steinmeier will all give closely-watched speeches, may offer a first indication of which way the party is heading. Officially, the SPD says it will wait another year before naming Merkel's challenger.
STRENGTHS AND WEAKNESSES
Merkel's advisers are watching closely as the drama unfolds.
One of her top aides told Reuters on condition of anonymity that the expectation in the Chancellery was that Gabriel would end up as the SPD candidate because of his skills as a campaigner and the broad support he enjoys in the party.
"Merkel knows Steinbrueck's strengths but she also knows his weaknesses," the aide said. "A very specific part of the population likes him, but he's not a 'man of the people' and he can be provoked easily."
Manfred Guellner, head of the Forsa polling group, said he didn't believe anyone in the SPD had a chance of beating Merkel, saying the party had "zero chance" with Steinbrueck.
But Steinbrueck's supporters believe he would be a formidable opponent, especially in the midst of a financial crisis that Merkel herself has said may be Europe's toughest challenge since World War Two.
It was Steinbrueck, they point out, who stood next to Merkel in the Chancellery on a grey Sunday in October 2008 to announce that the government was guaranteeing all private savings deposits in Germany.
This "line-in-the-sand" announcement at the height of the global financial crisis helped calm the situation. After a series of bank bailouts, Germany regained its footing and bounced back strongly from the turmoil unleashed by the collapse of Lehman a month before.
Three years later, Germany finds itself in what could be an even deeper crisis. The euro zone, launched to much fanfare 13 years ago as a model of economic cooperation, risks splintering apart and dealing Europe a humiliating setback.
Steinbrueck and the SPD have been calling for months for bolder steps from the government, including the introduction of jointly issued euro bonds.
But Germany, Europe and its partners are still waiting for a game-changing announcement from Merkel and her centre-right government -- a coalition that now includes the liberal Free Democrats (FDP) of Guido Westerwelle and Philipp Roesler.
"I can already hear the speech he'll give in the market square," said a senior German official who worked closely with Steinbrueck during his time as finance minister and believes he is the only SPD politician with a chance of beating Merkel.
"We may not have gotten it all right, he'll say, but when I was at Merkel's side we guaranteed your bank deposits, we overcame Lehman Brothers and Germany emerged strong from the crisis. Now she's got Guido and little Philipp at her side and look what's happened." (editing by Janet McBride)
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