Merkel faces first 'Schulz effect' test in German state election

German Chancellor Angela Merkel speaks during a campaigning event of Christian Democratic Party (CDU) in Sankt Wendel, Germany, on March 23, 2017.
German Chancellor Angela Merkel speaks during a campaigning event of Christian Democratic Party (CDU) in Sankt Wendel, Germany, on March 23, 2017. PHOTO: EPA

BERLIN (BLOOMBERG) - German Chancellor Angela Merkel's party faces its first electoral test by the resurgent Social Democrats under challenger Martin Schulz as the western state of Saarland goes to the polls on Sunday (March 26).

Voters in the former coal-and-steel region along the French border will determine whether Mrs Merkel's Christian Democratic Union extends its 18-year hold on the state premier's post.

Polls suggest the Social Democrats have tightened the local race since choosing Schulz, a former European Parliament president, to run for chancellor in the national election on Sept 24.

While the state is the nation's second-smallest with just short of 1 million people, a defeat for Mrs Merkel's party would signal vulnerability for the chancellor as she seeks a fourth term.

Saarland's CDU-led government with the SPD as junior partner mirrors the "grand coalition" of the two biggest parties on the national level. Projections based on exit polls will be published when polling stations close at 6 pm local time.

"Take my words seriously: Every vote really does count in this election," Mrs Merkel told a party rally in the town of St. Wendel, a CDU stronghold in Saarland, on Thursday.

Should the SPD win enough seats in the state parliament to form a coalition with the anti-capitalist Left party or the Greens, the power shift would further boost the "Schulz effect" that's energising the party, and help draw battle lines for the national campaign.

CDU strengths include the popularity of Saarland's premier, Annegret Kramp-Karrenbauer.

Coalition Calculus

Mrs Merkel's get-out-the-vote effort in the state included playing up Germany's record-low unemployment and fiscal surplus, while alleging that a left-wing government would be weak in fighting crime and terror.

The CDU had 35 percent support in Saarland, compared with 33 per cent for the SPD, according to an INSA poll for Bild newspaper published Wednesday.

The Left, under former German Finance Minister Oskar Lafontaine in the state, polled 13 per cent. The Greens, at 4 per cent, would fail to meet the threshold to enter the state assembly, according to the poll.

An FG Wahlen survey published Thursday gave the CDU a 5 percentage-point lead over the SPD. In the state's last vote in 2012, Mrs Merkel's party took 35.2 per cent, the SPD 30.6 per cent, the Left 16.1 per cent and the Greens 5 per cent.

The political calculus for Mrs Merkel's party doesn't get easier after Saarland. Two bigger states with SPD-led governments, North Rhine-Westphalia and Schleswig-Holstein, hold elections in May. Polls show the CDU trailing in both.

An SPD victory in Saarland "could be the beginning of a domino effect," Famke Krumbmueller, a partner at Paris-based political risk adviser OpenCitiz, said in an interview.