By Stephen Brown
BERLIN (Reuters) - German Chancellor Angela Merkel's government called for unity on Thursday after coalition rebels forced a humiliating vote over the presidency that could lead to pressure for her austerity package to be watered down.
The struggle to get Christian Wulff elected to the largely ceremonial post of head of state on Wednesday, even when Merkel had a clear majority on paper, showed growing disenchantment with the leadership of her 9-month-old centre-right alliance.
Analysts said party cadres sent a clear message to Merkel that she needed to make major changes and possibly tone down her 80 billion euro austerity drive, criticised at home as unfair and abroad as likely to hinder the world recovery.
Coming after a series of resignations depriving Merkel's Christian Democratic Union (CDU) of its most experienced figures -- as well as Horst Koehler's sudden departure as president -- the vote cast doubts on the German leader's future.
"Growing uncertainty about the stability of the German government could have detrimental spill-over effects as far as the euro area is concerned," Barclays Capital analyst Thorsten Polleit wrote, citing Germany's central role in the euro crisis.
Dozens of members of parliament from Merkel's coalition twice voted against Wulff and only obeyed in the third round after Merkel made a personal plea for unity.
"We've got the message: we've got to start working better as a coalition," said the second in charge of Merkel's CDU, Hermann Groehe, on German television.
Conservative state premiers assured Merkel of their support. Thueringen's Christine Lieberknecht called Merkel "unquestioned as the party leader" and Saxony's Stanislaw Tillich was "ready to ready to support Merkel on the party board as I always have."
But they lamented the coalition's shortcomings, with Tillich saying it "squandered the chance to get off to a fresh start."
SOLDIERING ON
Some newspapers called it a "disaster" for Merkel and her main ally Guido Westerwelle of the liberal Free Democrats (FDP).
"Merkel and Westerwelle are fighting for their political survival," the business daily Handelsblatt said.
With pressure to soften the budget cuts now likely to grow, Lieberknecht said they must be more "equitable and meaningful."
The coalition must quickly reach agreement on healthcare reform and budget cuts, she said, adding: "The cancellation of child benefit for people on the dole has to be scrapped."
The healthcare debate, with the government needing to plug a funding gap of 11 billion euros next year alone, has provoked a slanging match in the coalition, with the FDP accusing Merkel's Bavarian conservative sister party, the Christian Social Union, of acting like "wild sows" to block health reforms, and the CSU calling the FDP "clowns."
Merkel, Westerwelle and CSU chief Horst Seehofer were due to meet on Thursday and Friday to seek agreement on healthcare.
The disarray in the 55-year-old chancellor's government is all the more surprising given the historic setback suffered by the main opposition Social Democrats in last year's national election, and the strong recovery in the German economy.
The government is confident the economy will grow much more than its official 1.4 percent forecast this year and Economy Minister Rainer Bruederle used good retail sales data to liken Germany's economy to its strong World Cup soccer performance.
"Germany is back -- not just in sports, but also in terms of the economy," Bruederle told parliament.
Analysts say that with the coalition short of alternatives and the opposition still weak, Merkel was unlikely to disappear soon, though she might not survive the full term until 2013.
Grace Annan at IHS Global Insight said Merkel would "soldier on, hoping to profit from the fledgling economic upswing as the year progresses."
(Additional reporting by Andreas Rinke, Klaus-Peter Senger, Brian Rohan and Erik Kirschbaum; writing by Stephen Brown, editing by Peter Millership)
