Steinbrueck surprise shakes up German election race

BERLIN (Reuters) - Next year's German election just got a lot more interesting.

News on Friday that Peer Steinbrueck, a former finance minister with an acerbic wit, will lead the opposition Social Democrats (SPD) into the 2013 vote will have stirred unease in Chancellor Angela Merkel's entourage, observers say.

Just a few weeks ago Steinbrueck was seen as the least likely of three SPD contenders - a "troika" that included party chief Sigmar Gabriel and former foreign minister Frank-Walter Steinmeier - to challenge Merkel.

His nomination, roughly one year before Germans go to the polls, means the campaign will be more confrontational. Merkel can no longer count on the consensual, conciliatory SPD she experienced in the 2009 campaign, when the centre-left party was led by the far more diplomatic Steinmeier.

For the SPD, choosing Steinbrueck amounts to a high stakes gamble. The 65-year-old from Hamburg, an avid chess player who won the endorsements of two former SPD chancellors - Helmut Schmidt and Gerhard Schroeder - is perhaps the only politician in the party with a hope of beating Merkel.

His centrist positions could lure conservatives from the ruling Christian Democrats (CDU) and Free Democrats (FDP), who are fed up with the chancellor's leftward policy shift on issues ranging from nuclear power to childcare and wages.

And his financial expertise - he led Berlin's response to the 2008/9 global financial crisis - could convince voters that he would be a safe pair of hands in leading Germany through the euro zone turmoil.

Although a majority of Germans praise Merkel's handling of the euro crisis, there is a feeling that she has failed to lay out a convincing vision for Europe's future or rally the country behind her policy goals.

Steinbrueck, a gifted speaker with clear-cut opinions and a readiness to express them in unvarnished fashion, will appeal to Germans who bemoan Merkel's caution and slipperiness.

"The big question for the SPD is who has the best chance to beat Merkel. To me that's Steinbrueck," said Frank Decker, a political scientist at Bonn University.

RUFFLING FEATHERS

But a Steinbrueck candidacy also carries big risks for the SPD.

Traditional leftists in the party may balk at supporting a centrist who as finance minister backed an increase in the retirement age, and in his 2010 book "The Bottom Line" urged the SPD to distance itself from its union roots.

This week Steinbrueck unveiled a set of tough new proposals for reining in banks, in part to assuage the fears of the party's powerful left-wing.

Steinbrueck and the SPD will also have to convince Germans that bolder steps to resolve the euro crisis, including some form of common bond issuance, are the right course. Polls show this will be a hard sell.

But perhaps the biggest challenge for Steinbrueck will be controlling himself.

A tall man with sparse, spiky hair, he has earned a reputation for speaking his mind and ruffling feathers.

"Steinbrueck says what he thinks. Ninety percent of the time it's a strength, the other ten percent it gets him in trouble," said a senior German official who worked closely with Steinbrueck when he was finance minister.

When Nicolas Sarkozy gate-crashed a meeting of European finance ministers in 2007, Steinbrueck took him to task for lax budget policies, infuriating the former French president.

After investment bank Lehman Brothers' bankruptcy in 2008 he blamed the United States for spawning the financial crisis and predicted that its days as a financial superpower were numbered.

His biggest clash came with the Swiss, whom he likened to "Indians" running scared from the cavalry during his 2009 crackdown on tax havens.

After news of his candidacy emerged on Friday, the right-wing Swiss People's Party tweeted: "Will Switzerland now have to protect its borders from the German cavalry?"

Last year Steinbrueck made headlines for loudly heckling his successor as finance minister Wolfgang Schaeuble in parliament.

"If you want to become chancellor, you better learn some manners," Schaeuble shot back.

Schaeuble was probably right. Steinbrueck will need to control his temper and rhetoric if he is to be taken seriously in Germany, a country where moderation and seriousness in politics are highly valued commodities.

Officials close to Merkel see another key weakness: Steinbrueck does not suffer fools gladly.

On the campaign trail he can sometimes seem condescending and distant. In the one race Steinbrueck did run, the 2005 election in the big state of North Rhine-Westphalia, he suffered a humiliating loss to the CDU, prompting then-chancellor Schroeder to call an early federal election that he ended up losing to Merkel.

"If you show a dumb person they are dumb, they will hate you. That is his big problem," a top Merkel aide told Reuters.

The big question in the 2013 election will be whether German voters, who are notoriously averse to change in times of crisis, are really ready for something new.

The opinion polls, which give Merkel a 53 to 36 percent advantage over Steinbrueck in a theoretical contest for chancellor, suggest not.

But if, after eight years of Merkel, Germans decide they want someone who slams their fists on the table and isn't afraid to call the shots, then Steinbrueck has a chance.

Regardless who wins, the German election is shaping up as a far more interesting contest than it seemed only a few weeks ago.

(editing by Janet McBride)

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