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NINETY EIGHT REGENCY

German election result raises worries over Opel's future

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German election result raises worries over Opel's future

SEPTEMBER 28, 2009 - 9:46 AM ET

BERLIN (Reuters) -- German Chancellor Angela Merkel could clash with her new government partners over the fate of Opel.

Merkel will head a center-right coalition government after her Christian Democrats (CDU) and their sister party, the Christian Social Union (CSU), secured 33.8 percent of the vote in Germany's election on Sunday, with her new partners, the Free Democrats (FDP), taking 14.6 percent.

The business-friendly FDP, which heads into government after 11 years in opposition, has been skeptical of Germany's support for a plan by Magna International Inc. and its Russian partner Sberbank to buy a 55 percent stake in Opel from General Motors Co.

FDP party member Dirk Pfeil, who sits on the board of the trust overseeing Opel, refused to endorse the deal earlier this month.

The European Commission is looking closely at Berlin's pledge to give Opel, which employs 25,000 workers in four German plants, 4.5 billion euros in aid.

And other European countries have questioned the plan, which was forced through by Merkel in large part because it promised to safeguard German jobs.

Potential cracks

Any signs of cracks in the new government could embolden countries like Britain, Belgium and Spain, which oppose the deal because of concerns about jobs at their own Opel plants, and undermine Merkel's hopes of pushing it through.

FDP leader Guido Westerwelle sent a signal to Merkel on election night, vowing in a television roundtable to push through his market-liberal agenda "step by step" as Merkel shifted uneasily in the seat next to him.

"We will have our arguments in some areas," Merkel acknowledged. "We went into this election as different parties."

Over the coming weeks, Merkel and Westerwelle must hammer out compromises on economic, security and foreign policy in what may turn out to be tougher coalition negotiations than many assumed before the vote.

Labor market policy, an area where the parties were broadly in agreement as recently as four years ago, could also become a minefield now that Merkel has shifted her CDU decidedly to the left.

The FDP wants to make it easier for firms to fire workers in tough times and would also like to whittle away at the German system whereby employee representatives get seats on the boards of companies -- both no-go areas for Merkel, particularly with unemployment on the rise.

"The FDP will certainly push during the coalition talks for more reforms but Merkel's reform appetite seems limited," said Dirk Schumacher, an economist at Goldman Sachs.

He said her election-night promise to be the "chancellor of all Germans" was a signal to the FDP that she will resist their push for more far-reaching steps.

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