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Opel-aid debate puts Merkel in the middle of political tug of war

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Opel-aid debate puts Merkel in the middle of political tug of war

June 10, 2010 14:31 CET

FRANKFURT/BERLIN (Reuters) -- German coalition government divisions over aid to Opel have widened an already fractious relationship and show no signs of mending quickly.

Chancellor Angela Merkel was meeting the heads of four regional states with Opel plants Thursday to discuss financing options for the firm after her economy minister, Rainer Bruederle of the liberal Free Democrats (FDP), rejected federal aid on Wednesday.

Although Merkel campaigned for a centre-right coalition with the FDP ahead of September's elections, her junior partner has consistently caused discord in Berlin on issues ranging from tax cuts to health care reform.

The FDP's opposition to state aid for Opel vexed a largely pragmatic chancellor who had worked far more harmoniously with her rival Social Democrats in the previous legislature.

Merkel has said the "last word had not been spoken" over Opel and that she would "do everything" she could to ensure support to Opel's 25,000-person German work force.

U.S. automaker General Motors Co.'s European arm had sought 1.1 billion euros ($1.32 billion) in German state aid as part of a 3.7 billion euro package to get back on its feet.

GM is contributing 1.9 billion euros to the plan and wants European governments to provide loan guarantees for the rest.

"That the chancellor and those states with Opel plants -- which by the way all get subsidies from other German regions -- now want to offer taxpayer money by circumventing (the rejection) has little to do with responsible economic policy," FDP deputy parliament leader Patrick Doering told Reuters.

Even the liberal economics minister of the German state of Hesse, home to Opel's headquarters, was perplexed by Merkel's decision to seek alternative sources of state financing.

Lots of questions

"I don't really know what motivated the chancellor to create the impression that the decision of the federal economy minister ... could be corrected," said the FDP's Dieter Posch, calling the rejection of aid for his local carmaker "understandable."

Wednesday's drama may have been an attempt to appease both parties' electoral bases, but the decision seemed to leave the coalition with the laissez-faire Free Democrats in disorder.

Bild, Germany's largest-circulation newspaper that often shapes public debate, had a front-page headline that reads: Crazy tug of war over Opel aid.

One FDP source remained optimistic despite the increased division: "It looks as if the discussion is getting worse, but I believe that reason will succeed in the end and both sides will pull themselves together to find a common solution."

A stalemate among four top officials on an advisory panel to Germany's rescue fund on Wednesday allowed Bruederle to take personal responsibility for quashing Opel's aid application, arguing GM was strong enough now to shoulder the burden.

Opel CEO Nick Reilly said he would submit fresh applications for loan guarantees at each of the four German states, which have all signaled their willingness to provide what they can afford in terms of support. Opel labor leader Klaus Franz shot back at Bruederle's comment that no bank was willing to lend Opel money if a bank had to assume even a 10 percent default risk.

"Weeks ago Opel had signed contracts with Deutsche Bank and Barclays that were a prerequisite for applying for loan guarantees," he said. "Bruederle knows that."

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100610/ANE/306109974/1193#ixzz0qSZPK55H

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