Angela Merkel's government suffered a humiliating defeat to the opposition Social Democrats and Greens in key city state elections in Berlin last night as divisions within her coalition over the Greek debt and the future of the euro deepened further.
The German Chancellor's liberal Free Democrat (FDP) coalition partners took only 2 per cent of the vote in the Berlin poll and were ousted from the city's parliament. Her own conservative Christian Democrats (CDU) fared better, capturing 23 per cent.
However their performance was outstripped by the city's ruling Social Democrats (SPD), led by mayor Klaus Wowereit, who won 29 per cent, and the Greens with 18 per cent.
The Berlin vote was overshadowed by continued infighting within Ms Merkel's coalition over the euro and Greece and predictions that her ruling alliance threatens to collapse if the disunity continues.
Sigmar Gabriel, the SPD leader warned: "If the Chancellor and her finance minister cannot live up to their responsibilities towards Germany and Europe, they cannot continue to govern with this coalition."
The humiliation suffered in Berlin by Ms Merkel's coalition parties reflected her government's increasing unpopularity. An opinion poll by YouGov last week showed that a record 82 per cent of Germans thought her ruling alliance was doing a bad job in its handling of the euro crisis.
Sixty-six per cent of those polled said they were against Germany providing any more financial support for Greece to help that country overcome its spiralling debt problem.
Yesterday infighting over Greece and the euro boiled over within Ms Merkel's coalition. Leading rebels among the FDP continued to defy her attempts to ban speculation about Athens leaving the eurozone. The party said it planned to ballot its 60,000 members to gain support for a motion that would enable Greece to ditch the single currency.
Ms Merkel's warnings were also flatly ignored by others. Philip Rösler, her liberal Economy Minister, reiterated his demand that Greece should be allowed an "orderly default" on its debts.
Criticism is also growing from within the ranks of her own party, and members of Bavaria's conservative CSU party – the sister organisation to Ms Merkel's CDU – stepped up opposition to the Chancellor's attempts to ban speculation about a Greek default. "It is absolutely clear that there have to be insolvency provisions for countries in need if the aid provided by other countries not longer helps," said Stefan Müller, the CSU chief parliamentary whip.
Wolfgang Schäuble, Ms Merkel's veteran conservative Finance Minister, insisted in an interview with Bild am Sonntag that it was Greece alone which had to decide whether it wanted to stay in the eurozone.
"Being a member of a currency union is an opportunity but also a heavy burden. The conditions are very hard," Mr Schäuble told the newspaper. "The Greeks must decide whether they want to shoulder this burden. They must come up with figures which prove that they are sticking to the plan. Nobody should have any illusions."
The Merkel government faces its next major test in just under two weeks when, as part of its plans to rescue Greece, parliaments meet to ratify boosting the lending capacity of the European Financial Stability Facility (EFSF) from €250bn to €440bn. With opposition increasing from within her own ranks, Ms Merkel cannot be certain of a majority.
The Chancellor has indicated that she may have no option but to rely on the votes of opposition Social Democrats and Greens to get the measure through parliament. Observers predict that, if she takes this course, she will be forced to hold a parliamentary vote of confidence in her government, which would almost certainly result in the end of her administration.
Mr Gabriel, the SPD leader, indicated yesterday that, if this were the outcome, his party would be prepared to allow Ms Merkel to continue as head of a minority government for an interim period to enable it to save thesingle currency.
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