LDN - Business

German liberals would expect finance ministry in Merkel coalition

[September 18, 2017] BERLIN (Reuters) - Germany's Free Democrats (FDP) would want the finance ministry in exchange for joining Chancellor Angela Merkel in the country's next coalition government, a member of the party's executive said.

Setting out conditions days before federal elections that Merkel is almost certain to win, albeit short of an absolute majority, the FDP also ruled out partnering her conservatives if she supported French plans to deepen fiscal integration in the euro zone.

Often viewed as Merkel's natural allies, the socially liberal FDP were part of her second government from 2009 to 2013. They crashed out of parliament that year but are hoping to re-enter the legislature on Sunday as the third-largest party.

Current Finance Minister Wolfgang Schaeuble, of Merkel's Christian Democrats (CDU), has held the post since 2009 and is the most high-profile member of her cabinet.

But Alexander Hahn, a member of the FDP's national executive, said the ministry should go to someone from his party.

"The FDP should enter no government in which it cannot name a finance minister," Hahn told mass-market daily Bild in remarks published on Monday.

On Sunday, FDP leader Christian Lindner said setting the agenda for Europe was the most important issue for his party in any coalition talks with the conservatives after the Sept. 24 vote.

"I fear that Ms Merkel has already agreed to new funding mechanisms (for the EU) with (French President Emmanuel) Macron," he told the Welt am Sonntag newspaper.

"Everything that goes in the direction of financial transfer on the European level, be it a euro zone budget or a banking union, is a red line for us".

Macron, who is to present his views on the future of the euro zone on Sept. 26, has called for a finance minister and a standalone budget for the bloc, while European Commission chief Jean-Claude Juncker on Wednesday urged EU governments to use economic recovery as a springboard toward closer union.

PRIME MOVER SCHAEUBLE

Merkel has said she would work with Macron on strengthening the euro zone.

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Free Democratic Party (FDP) leader Wolfgang Kubicki speaks at the FDP party convention in Berlin, Germany, September 17, 2017. REUTERS/Axel Schmidt

But Germany remains insistent that member states should take primary responsibility for their own economic problems, a principle whose prime exponent has been Schaeuble.

He is revered by a significant part of the conservative voter base who see him as a guardian of their austerity-oriented interests in the euro zone.

The FDP, who held the foreign minister in their last union with the conservatives, have reinvented themselves under Lindner, who preaches a hard line on Europe.

They are polling 8 to 10 percent in surveys, while Merkel's conservatives are on around 37 percent, leaving their combined forces just short of a majority.

Analysts say completing a banking union and creating a euro zone budget would provide more stability for the currency bloc, and that a conservative/FDP coalition might threaten such plans.

"I fear there could be a strong reaction on bond markets should the FDP push for a literal enforcement of fiscal rules or for an expulsion of Greece as part of a future ruling coalition," said Martin Lueck of asset manager BlackRock.

A grand coalition with the centre-left Social Democrats (SPD), Merkel's current partners and polling around 23 percent, would make it much easier for the chancellor to work with Macron on overhauling the euro zone.

The centre-left SPD have often criticized Schaeuble's tough stance on Greece and have even backed the idea of common euro zone debt.

The FDP are fighting for third spot against the anti-immigrant Alternative for Germany (AfD), which is forecast to enter parliament for the first time.

(Writing by Joseph Nasr; editing by John Stonestreet)

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