Political Analysis of Problems Facing German FDP Party

The pro-business Free Democratic Party is battling extinction after a collapse in voter support that has seen it crash out of regional parliaments in a string of recent state elections. The junior partner to the conservative Christian Democrats of Chancellor Angela Merkel is desperate to sharpen its profile and score points ahead of two elections that are widely expected to determine its fate, in the state of Schleswig-Holstein on May 6 and, more importantly, in North Rhine-Westphalia on May 13.

Last week, the ailing party celebrated itself for scuppering plans to provide a €71 million ($95 million) state loan guarantee to set up an agency for the retraining and job placement of 11,000 employees of Schlecker, the drug store chain that has gone bankrupt.

Conservatives had backed the plan for the employees but the FDP evidently decided that a hard line would appeal to its traditional, well-off clientele, and rejected state involvement. Rainer Brüderle, the FDP's parliamentary group leader, took a swipe at Merkel's party, declaring that his party had successfully fought traces of "Social Democratization" among the conservatives.

The increasingly abrasive FDP is a growing problem for Merkel. For months, the chancellor kept her ailing partner on a short leash, forcing it to accept the early phaseout of nuclear power and plans to introduce a special childcare benefit for stay-at-home mothers. But the FDP's election debacle in the small south-western state of Saarland on March 25, when it slumped to 1.2 percent, has given her a change of heart.

She and her strategists have decided that the demise of the FDP wouldn't be in the CDU's interests. "We must keep the FDP above water," says one of Merkel's advisors.

The conservatives are worried that the FDP's problems will cause chaos in the center-right coalition. Defeats for the FDP in the two elections in May would shake it to its core and probably force FDP leader Philipp Rösler to resign. Some in the FDP are already toying with the idea of pulling out of the government and trying to revive the party in opposition.

Merkel wants to prevent this scenario at all costs because she believes it would end up benefiting the opposition center-left Social Democrats. In a parliament without the FDP, the balance of power would shift to the left and make a center-left alliance of SPD and Greens more likely. Merkel would also be left without a natural coalition partner on the right, limiting her options for staying in power.

FDP on Life Support

She wants to campaign for a third term in the 2013 election with a pledge to repeat her current center-right coalition with the FDP. But that will only be a credible option if the FDP shows signs of life.

That is why the conservatives have been providing the FDP with emergency oxygen in the form of policy concessions that have allowed it to chalk up a few victories. Merkel has ceded ground on immigration, for example, where the FDP has long been calling for a relaxation of entry rules for skilled workers.

Last week conservative leaders agreed to cut the minimum salary requirement for foreign chemists, engineers and computer specialists taking jobs in Germany to €44,800 from €66,000. It wasn't the only gift Merkel's party has presented to the FDP of late. The conservatives have also been conciliatory on the contentious issue of a possible financial transactions tax. For months, Merkel had declared she was ready to introduce such a tax just within the euro zone if necessary, while the FDP insisted it made no sense to impose a tax that excludes Europe's biggest financial center, London. The British government is opposed to the tax.

Now there are signs of a compromise. Finance Minister Wolfgang Schäuble and Volker Kauder, the parliamentary group leader of the conservatives, are considering introducing a narrower stamp duty based on the British model and initially levied on company shares, before being widened to include bonds and derivatives later. That is in line with a suggestion made by Brüderle of the FDP.

Harmony Won't Work, FDP Believes

But these concessions aren't enough for the FDP, which has lost faith in its ability to win back voters through harmonious work in government. The party has realized that Merkel alone gets the credit when her coalition makes policy progress. So FDP leader Rösler favors an abrasive stance towards the conservatives.

The FDP, Rösler believes, wins voters whenever it shows a distinct profile. It did so in February when it forced Merkel to accept civil rights activist Joachim Gauck as new president, and in March when it refused to back the North Rhine-Westphalia state budget in a parliamentary vote, forcing the center-left government in the state capital Düsseldorf to call an early election.

This week, the FDP has positioned itself in opposition to a CDU plan to provide state money to parents who elect to care for their toddlers at home rather than send them to state subsidized daycare centers.

"In Berlin and in Düsseldorf we showed we can be successful when we have the courage to act," Rösler told party leaders at a meeting on Monday of last week. "We will stick to this strategy."

It is infuriating the conservatives. The governor of Bavaria, Horst Seehofer, whose Christian Social Union party rules the state in a coalition with the FDP, made no attempt to disguise his anger at last week's failure to agree a deal for the Schlecker employees after the FDP economy minister blocked an agreement.

"I am very concerned that the the veto of our Bavarian ceconomy miniser has obstructed the path to a secure future for the Schlecker employees," Seehofer fumed. "Bavaria is known throughout Germany as a state that solves problems. Now we're causing problems. That doesn't fill me with pride."

So Merkel's attempt at harmony has failed before it really got off the ground. Many conservatives regard the FDP as ungrateful. On Monday, the time of concessions seemed to be over when Merkel slapped down a proposal by Rösler to raise a tax break for commuters in response to the current surge in gas prices.

Not everyone in the FDP agrees with Rösler's strategy. In an interview with SPIEGEL ONLINE on Tuesday, Christian Lindner, who is leading the party's desperate campaign to clear the five percent threshold and remain in the North Rhine-Westphalia parliament, distanced himself from Rösler's confrontational style, saying: "You don't win trust by being loud but by explaining your own policies."

In a startling sign of confidence, Lindner declared on Sunday that he wasn't taking the Pirate Party very seriously -- even though support for the maverick, pro-Internet freedom party currently stands at around 10 percent nationwide -- more than three times higher than the FDP.