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  Crisis Summit in London: Merkel's Loss of Face

Crisis Summit in London Merkel's Loss of Face

By Carsten Volkery in Berlin

Part 2: Division in Berlin

Berlin would like to avoid such errors in the future. Instead, Merkel has called a meeting for next Sunday -- at which Steinmeier will be present -- which will include a handful of cabinet members, bank managers and other economic experts. Together, the group is to come up with a collective analysis as to what one can expect from the economy in 2009. Before Merkel's government can decide whether to introduce a second stimulus package, government spokesman Wilhelm said, a "solid basis for a decision" is necessary. He said it needs to be clear whether the economic slide is a result of credit shortfalls or because of weak domestic demand.

Steinmeier Campaigns against Merkel

Still, the joint appearances change nothing when it comes to the rivalry between Merkel and Steinmeier. He has slowly begun to ramp up his campaign and on Monday met with representatives of German municipalities. "It is important that the vice chancellor develops his own picture of the situation," explained Jens Plötner, spokesman for the Foreign Ministry.

Indeed, Steinmeier currently enjoys the best of both worlds. Not only can he make headlines on the international stage, but he can operate domestically as vice-chancellor and candidate. In Berlin's Estrel Hotel on Monday, where Social Democrats were gathered to kick off their campaign for European Parliament elections in June, Steinmeier demanded an investment package for German municipalities, states and the nation as a whole. The demand comes on the heels of his support for a "European future package" to protect jobs in the EU. Steinmeier received immediate backing from SPD head Franz Müntefering, who said that German municipalities require annual investments of some €80 billion ($102.6 billion). Current expenditures of just €20 billion a year leave plenty of room for additional state intervention.

But pressure on Merkel's government isn't just coming from the left side of the political spectrum. The Christian Social Union (CSU), the Bavarian sister party to Merkel's CDU, continues to ask for immediate tax cuts.

Chancellor Merkel has called for a governing coalition meeting to be held on Jan. 5 in Berlin. At the gathering, the competing camps will clash and finding a compromise promises to be difficult. Merkel wants to keep as many arrows in her quiver as possible -- her re-election campaign, after all, will last until next September. But forecasts currently seem to indicate that she won't be able to wait that long. Economic realities may pressure her into action as early as next spring.

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