Ex-finance minister to challenge Merkel in 2013

[September 29, 2012]  BERLIN (AP) -- Germany's main opposition party embarked Friday on an uphill struggle to oust Chancellor Angela Merkel, choosing a respected former finance minister who helped steer the country through the financial crisis as her challenger in next year's election.

Peer Steinbrueck, 65, emerged as the center-left Social Democrats' candidate after a monthslong guessing game over which of three potential challengers would face Merkel in the parliamentary vote expected next September.

Party chairman Sigmar Gabriel declared that Steinbrueck is the right candidate for a campaign in which tougher regulation of banks and markets will be a central issue.

"Taming the financial markets and winning back democratic control over them is the central condition for creating a new social balance in Germany and Europe," Gabriel said at a news conference.

The Social Democrats have long accused Merkel's center-right governing coalition of doing too little to prevent financial excesses. Earlier this week, Steinbrueck presented a plan that, among other things, called for big European banks to build up a euro200 billion ($258 billion) rescue fund rather than relying on taxpayer-funded aid.

But polls suggest that, while Steinbrueck is well-placed to attract swing voters, the Social Democrats will struggle to unseat the popular, 58-year-old Merkel, Germany's leader since 2005.

The Social Democrats consistently trail her conservative Christian Democrats, and surveys show no majority for their hoped-for coalition with the Green party.

Polls also show no majority for Merkel's current coalition with the pro-market Free Democrats, which has become notorious for its infighting, but suggest Merkel would be well placed to lead another "grand coalition" of right and left with the Social Democrats.

That's the combination under which Steinbrueck served as finance minister from 2005 to 2009, when he worked closely with the chancellor to limit the fallout from the demise of U.S. investment bank Lehman Brothers.

This time, he's keen to avoid ending up as Merkel's junior partner again.

"We want to oust this government," Steinbrueck said. "It is evident that this government won't be re-elected in a year's time, but we don't want it to be only partially replaced."

One significant source of Merkel's popularity is her handling of the debt crisis in the 17-nation eurozone.

The Social Democrats and the Greens have criticized Merkel for what they decry as a too-little, too-late response -- but then they end up supporting her plans in Parliament.

They have extracted limited concessions from her, such as a commitment to support investments to foster economic growth in Europe, but haven't persuaded her to back any kind of pooling of eurozone countries' debt.

Steinbrueck has a reputation for plain speaking, which hasn't always made him popular with fellow Social Democrats. As a minister, he once remarked that his party appeared to the public like "crybabies" in the face of Merkel's popularity.

In 2009, he called for European governments to use "the whip" against neighboring Switzerland in the fight against tax evasion.

His successor, Wolfgang Schaeuble, has taken a more diplomatic approach, negotiating a deal with Switzerland. But with the election in sight, the Social Democrats have vowed not to let that through Parliament's upper house, where Merkel's coalition lacks a majority.

Steinbrueck was governor of North Rhine-Westphalia, Germany's most populous state, from 2002 to 2005 but lost the state to Merkel's conservatives -- a result blamed largely on the unpopularity of the Social Democrat-led national government at the time.

Steinbrueck's most serious rival, former Foreign Minister Frank-Walter Steinmeier, said he didn't want to try another run at the chancellery.

Steinmeier was Merkel's challenger in the 2009 election, when the Social Democrats slumped to their worst result in post-World War II Germany, winning just 23 percent of the vote.

[Associated Press; By GEIR MOULSON]

Juergen Baetz in Berlin contributed to this report.

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