Merkel's hand strengthened by German voters ahead of summits and national elections

Victory by German Chancellor Angela Merkel's conservative party in local elections of the country's most populous state suggests the 12-year leader will survive national elections in September.
Chancellor Angela  Merkel speaking during a campaign event in Aachen, Germany, on Saturday, May 13.
Chancellor Angela Merkel speaking during a campaign event in Aachen, Germany, on Saturday, May 13. PHOTO: BLOOMBERG

BERLIN (BLOOMBERG) - Chancellor Angela Merkel is picking up a tailwind for Germany's election in September, strengthening her position at home and on the global stage ahead of a series of summits with fellow leaders including President Donald Trump.

Written off last year for her open-border stance on refugees, Merkel is clawing back when it counts.

Her party's election victory in Germany's most populous state on Sunday (May 14) highlights her backing among voters as Merkel stands up for free trade, vows to hold the European Union together and fends off Trump's attacks in a conflict over defence spending.

Merkel plans to hold a news conference Monday at about 12pm in Berlin (6pm Singapore time), before hosting French President Emmanuel Macron for their first meeting after his inauguration.

"Almost everybody in Europe expects that Merkel will stay in power" now, Famke Krumbmueller, a partner at political-risk consultancy OpenCitiz, said by phone.

For European peers such as Macron, that means "he can be pretty sure now that he will have to deal with Angela Merkel in the next four years."

After Macron's victory in France, the decisive win by Merkel's Christian Democratic Union (CDU) in the German industrial heartland of North Rhine-Westphalia is another setback for the populists who propelled Britain out of the European Union and Trump into the White House.

After 12 years in office, it confirms the German leader's standing before she heads to the North Atlantic Treaty Organisation and Group of Seven summits in Brussels and Sicily next week.

'ROCK-SOLID' ECONOMY

Four months before the German election, an economic boom is buoying the national mood after the refugee crisis dragged down Merkel's approval ratings last year. Europe's biggest economy expanded at the fastest pace in a year last quarter.

"Germany is so rock-solid economically and politically," Erik Nielsen, global chief economist at UniCredit, said in an interview. "It's not so surprising that the sitting government is doing well - which is to mean the chancellor, they're the bigger party - when you have almost-record low unemployment, a very strong economy and a dangerous world outside."

Social Democratic Party (SPD) candidate Martin Schulz, who's challenging Merkel on a platform of greater income equality, saw his party suffer its third straight defeat in regional voting in the last test before the national election on Sept 24.

Support for the SPD fell to the lowest level since World War II in a traditional stronghold, while the Christian Democrats took about 33 per cent, a gain of more than 6 percentage points, according to projections by public broadcasters ARD and ZDF.

The anti-immigration Alternative for Germany, once polling as high as 13 per cent, was projected at about 8 per cent.

As the CDU gets a chance to govern the state for only the second time in 50 years, national polls put Merkel's Christian Democrat-led bloc as many as 10 percentage points ahead of the SPD.

"Merkel could not have hoped for a better basis to win a fourth term in office," Holger Schmieding, chief economist at Berenberg, said in a note to clients. "Anti-European populism seems to have peaked in the euro zone."

SOLDIERING ON

Schulz, a former European Parliament president, led the SPD to a surge in the polls after his nomination in January, only to see support fizzle in regional elections. He said he was personally saddened by the party's "whopping defeat" in his home state.

"But the SPD will stick with Schulz," Manfred Guellner, head of Berlin-based polling company Forsa, predicted in an interview. "At this point, they have no other choice than to run him in the federal election."