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Thousands of protesters, led by trade unionists, have rallied in Rome against the policies of Italy’s new coalition government.
Wielding red flags and placards, they urged the centre-left prime minister, Enrico Letta, to scrap austerity measures and focus on job creation.
Public trust in his fragile coalition with the centre-right is dropping, opinion polls suggest.
Italy is experiencing its longest recession in more than 40 years.
National debt is now about 127% of annual economic output, second only to Greece in the eurozone.
Unemployment is at a record high of 11.5% – 38% for the under-25s.
Before taking office, Enrico Letta vowed to make job creation his priority, but critics are unhappy that he has focused on property tax reform.
The issues of social justice and poverty came up when German Chancellor Angela Merkel had talks with the new Pope, Francis, at the Vatican on Saturday.
Organized by the metalworkers’ union FIOM and the CGIL union, Saturday’s peaceful march and rally drew supporters from across Italy. The turnout was unclear but 50,000 people had been expected to attend.
“We ask the government to change [former Prime Minister Mario] Monti’s and [former Prime Minister Mario Silvio] Berlusconi’s politics,” said Maurizio Landini, leader of the FIOM.
“If they don’t change, as the country asked for with its vote, we are going nowhere.”
A controversial poster depicted Chancellor Angela Merkel, who is seen as typifying austerity
One of the protesters, Enzo Bernardis, told Reuters news agency: “We hope that this government will finally start listening to us because we are losing our patience.”
Soon after being appointed, Enrico Letta met other eurozone leaders to convey growing public unrest over austerity measures in Italy.
But the new prime minister has to maintain a delicate balance between the policies of his own supporters and those of the centre-right, led by Silvio Berlusconi.
Italy’s coalition was only formed after two months of post-election deadlock.
Among the demonstrators in Rome were radical leftists.
A controversial poster depicted Chancellor Angela Merkel, who is seen as typifying austerity, in mock-Nazi uniform.
On Thursday, Pope Francis said in a speech that the global economic crisis had made life worse for millions in rich and poor countries.
Speaking after her private meeting with the pontiff, Angela Merkel told reporters: “Crises have blown up because the rules of the social market have not been observed…
“It is true that economies are there to serve people and that has by no means always been the case in recent years.”
Angela Merkel said she and Pope Francis had spoken mainly about globalization, the European Union and the role of Europe in the world.
“Pope Francis made it clear that we need a strong, fair Europe and I found the message very encouraging,” she added.
While she is not a Catholic herself, Angela Merkel, the daughter of a Lutheran minister, leads a party with a strong Catholic component.
European Union leaders are due to begin a two-day summit in Brussels to try to strike a deal on its next seven years budget.
High EU expenditure at a time of cutbacks and austerity across the continent is the main issue dividing the 27 member states.
They failed to reach a compromise at a similar summit last November.
The summit will almost certainly demand cuts in EU administration.
However, whatever is agreed still has to go to the European Parliament and MEPs are big backers of EU spending.
The EU Commission – the EU’s executive body – had originally wanted a budget ceiling of 1.025 trillion euros ($1.4 trillion) for 2014-2020, a 5% increase. In November that was trimmed back to 973 billion euros and later revised down to 943 billion euros.
However, with other EU spending commitments included, that would still give an overall budget of 1.011 trillion euros.
The UK, Germany and other northern European nations want to lower EU spending to mirror the cuts being made by national governments across the continent.
Another grouping, led by France and Italy, wants to maintain spending but target it more at investment likely to create jobs.
European Union leaders are due to begin a two-day summit in Brussels to try to strike a deal on its next seven years budget
French President Francois Hollande told reporters on Sunday that conditions were “not yet in place” for a deal but also signaled that Paris was prepared to make compromises.
Francois Hollande and German Chancellor Angela Merkel held talks in Paris on Wednesday before attending a France-Germany football match.
Angela Merkel’s spokesman said she and Francosi Hollande had had “a short but intense meeting… to see what kind of agreement could be made”.
angela Merkel – seen as the powerbroker in the summit – has already acknowledged that the talks will be “very difficult”.
In Brussels, a European Parliament spokesman warned that more severe cuts would leave the commission unable to do its job as the EU integrates more deeply in response to the financial crisis.
“How can we imagine that an EU institution can ensure a proper banking union with a budget that is cut by whatever billions in figures we hear, here and there?” said spokesman Olivier Bailly.
“At the moment, there is a need for a reality check between the requests that are sent to the commission, the council, the parliament, or the European Central Bank, and the budget – the means – that are given to these institutions to fulfill their commitments.”
The split in the EU reflects the gap between richer European countries and those that rely most on EU funding.
The argument for higher spending is supported by many countries that are net beneficiaries, including Poland, Hungary and Spain.
Others, mostly the big net contributors, argue it is unacceptable at a time of austerity.
Germany, the UK, France and Italy are the biggest net contributors to the budget, which amounts to about 1% of the EU’s overall GDP.
Analysts say failure to reach an agreement on its seven-year budget would mean the EU falling back on more expensive annual budgets.
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German Chancellor Angela Merkel has warned that her country’s economic climate in 2013 will be “even more difficult”.
In her New Year message, Angela Merkel also cautioned that the eurozone debt crisis was far from over.
However, she did say that reforms designed to address the roots of the problem were beginning to bear fruit.
Angela Merkel’s comments appeared to contradict German Finance Minister Wolfgang Schaeuble who said last week that the worst of the crisis was over.
In a taped interview to be broadcast later on Monday, Angela Merkel urged Germans to be more patient.
“I know that many people are naturally concerned going into the new year,” she said.
“The economic environment will not in fact be easier but rather more difficult next year. But we shouldn’t let that get us down; rather it should spur us on.”
German Chancellor Angela Merkel has warned that her country’s economic climate in 2013 will be even more difficult
She linked future German prosperity to a prosperous European Union.
“For our prosperity and our solidarity, we need to strike the right balance,” Angela Merkel said.
“The European sovereign debt crisis shows how important this balance is.
“The reforms that we’ve introduced are beginning to have an impact. Nevertheless we need to have further continued patience. The crisis is far from over.”
In an interview with the German newspaper Bild last week, Wolfgang Schaeuble cited positive developments in Greece and France, saying: “I think the worst is behind us.”
Germany – Europe’s largest economy – has been the paymaster in the eurozone crisis, a move unpopular with many German voters and some conservative MPs in Angela Merkel’s coalition.
Analysts say most Germans remain wary of eurozone bailouts but generally approve of Angela Merkel’s handling of the crisis.
In October, the German government slashed its forecast for economic output in 2013 to 1.0%, compared to 1.6% previously anticipated.
The country’s central bank has said Germany may even come close to recession early in the new year.
Nevertheless, Angela Merkel underlined that Germany in 2012 had the lowest unemployment since reunification in 1990.
Chancellor Angela Merkel is to unveil a memorial in Berlin to the Roma (Gypsy) victims of the Nazi Holocaust.
The memorial – a circular pool of water with a small plinth in the middle – will be in the Tiergarten park, near the Reichstag, the German parliament building.
The unveiling comes after years of delays and disputes over the memorial’s design and its cost.
Experts say between 220,000 and 500,000 Roma were killed during World War II.
“It’s very important to me that we have a culture of remembrance,” German Chancellor Angela Merkel said in an interview on her YouTube channel.
“Every generation must confront its own history afresh. And for that we must have suitable places that people can go to in the future, when the witnesses from the time are no longer alive.”
Angela Merkel acknowledged that the building of the memorial had taken a long time and entailed “many discussions”, and recalled that the memorial to murdered Jews of Europe had also taken more than 15 years to complete.
President Joachim Gauck and some 100 elderly survivors will join Angela Merkel at the opening ceremony on Wednesday.
Roma Holocaust memorial is a circular pool of water with a small plinth in the middle in the Tiergarten park, near the Reichstag
The memorial has been designed by the Israeli artist Dani Karavan. A fresh flower will be laid on the plinth at the centre of the memorial every day.
“Auschwitz” by Italian poet Santino Spinelli is engraved around the pool’s rim.
A chronology of the Nazi extermination campaign stands next to the memorial.
In 1982, Germany officially recognized the genocide of the Roma and Sinti – a related people who live mostly in German-speaking areas of Central Europe.
The leader of the Central Council of Sinti and Roma in Germany, Romani Rose, will also be at the ceremony.
He told Agence France-Presse: “Opening the memorial sends an important message to society that anti-Roma sentiment is as unacceptable as anti-Semitism.”
In recent years, Germany has been moving to commemorate the persecution of the Roma during World War II.
However, Roma organizations and human rights groups say they are still discriminated against in many European countries.
German chancellor Angela Merkel has called for the EU to be given the power to veto member states’ budgets, as leaders meet in Brussels for a summit.
Angela Merkel said the EU economics commissioner should be given clear rights to intervene when national budgets violated the bloc’s rules.
But French President Francois Hollande said the summit must keep focused on plans for a banking union.
Francois Hollande wants action to revive growth, while Germany stresses budget discipline.
“The topic of this summit is not the fiscal union but the banking union, so the only decision that will be taken is to set up a banking union by the end of the year and especially the banking supervision. The other topic is not on the agenda,” Francois Hollande said.
The banking union plan is fraught with legal complications, as it would give more powers to the European Central Bank (ECB) and possibly weaken those of national regulators. There is speculation that it could lead to treaty changes – something that has caused big headaches for the EU in the past.
The aim is to agree first on joint banking supervision, with the ECB playing the lead role. But the UK – the EU’s main financial centre – wants safeguards to protect the powers of the Bank of England.
The UK and some of the other nine non-euro states are also concerned about voting rights in the proposed banking union.
France and Germany differ over the timetable for such a union, with Berlin advocating caution.
Germany is also at odds with the European Commission over the scope of the proposed ECB supervision. Under the plan, all 6,000 banks in the 17-nation eurozone would be included, but Germany wants it limited to the biggest, “systemic” banks.
As the summit got under way its chairman, European Council President Herman Van Rompuy, invited all 27 leaders to attend the Nobel Peace Prize ceremony in Norway. The EU was awarded the prize last week.
“To mark this joyful occasion I hope all EU Heads of State or Government will be able to join celebrations in Oslo in December,” he said on Twitter.
But Greece, the eurozone state worst hit by the debt crisis, was gripped by another 24-hour general strike on Thursday, with at least 20,000 protesters thronging central Athens, amid clashes between demonstrators and police.
Addressing the German parliament in Berlin on Thursday morning, Angela Merkel said the EU should have “real rights to intervene in national budgets” that breached the limits of the EU’s growth and stability pact.
The EU’s economics commissioner, she suggested, should have the authority to send a budget back to a national parliament.
Unfortunately, Angela Merkel said, some EU member states were not ready for such a step.
“I am astonished that, no sooner does someone make a progressive proposal… the cry immediately comes that this won’t work, Germany is isolated, we can’t do it,” she added.
“This is not how we build a credible Europe.”
On the banking union Angela Merkel has repeatedly stressed that “quality must trump speed”.
Prime Minister Fredrik Reinfeldt of Sweden, one of the 10 EU countries outside the euro, echoed her stance, saying “there are a lot of questions that need to be answered legally” and “it’s better to get things right than to rush things”.
The idea is that the ECB would be able to intervene early on to prevent a systemically dangerous accumulation of debt on a bank’s balance sheets.
Once the legal framework is in place the new permanent rescue fund, the European Stability Mechanism (ESM), will be able to recapitalize struggling banks directly, without adding to a country’s sovereign debt pile.
The prize is a system that avoids huge taxpayer-funded bailouts like those arranged for Greece, the Republic of Ireland and Portugal.
The summit is taking place amid calmer European stock markets than at previous meetings and with less immediate concern over the debt crises in Spain and Greece, analysts say.
UK Prime Minister David Cameron made it clear that improving the EU single market was his priority at the summit.
He said that in the “global race” there was a risk of the EU falling behind.
The EU single market “still isn’t finished, in digital, in services, in energy, and that is the agenda I’ll be pushing very hard at this council”, he said.
Later Finland’s Europe Minister, Alex Stubb, said the UK was looking increasingly isolated and the summit appeared to be “26 plus one”.
“I think Britain is right now, voluntarily, by its own will, putting itself in the margins,” he told Reuters news agency.
“It’s almost as if the boat is pulling away and one of our best friends is somehow saying ‘bye bye’ and there’s not really that much we can do about it.”
Banking union – Brussels’ 3-stage plan
• Single supervisory mechanism (SSM)
• Joint resolution scheme to wind down failing banks
• Joint deposit guarantee scheme
Athens is tightening its security ahead of a visit by German Chancellor Angela Merkel, her first since the eurozone crisis erupted nearly three years ago.
Some 7,000 police officers are on duty, public gatherings are banned in certain areas of the city and protesters have been warned to “protect the peace”.
The visit comes as Greece bids to pass new cuts of 13 billion euros ($17 billion) to qualify for more bailout cash.
Analysts say Angela Merkel is regarded by many Greeks as the author of austerity.
While Germany has contributed the most money in the bailing out of Greece, its chancellor is held responsible for demanding that Greece make swingeing cuts in exchange for the financing it has received.
Analysts say Angela Merkel is regarded by many Greeks as the author of austerity
Speaking on Monday, Jean-Claude Juncker, chairman of the Eurogroup finance ministers of the eurozone, raised the pressure on Greece, calling on the government to demonstrate it could implement planned reforms “by 18 October at the latest” to qualify for the next bailout installment of 31.5 billion euros.
He was speaking as the eurozone’s new permanent fund to bail out struggling economies and banks was formally launched at the finance ministers’ meeting.
There has been growing unrest in Greece at the planned new cutbacks.
Police have banned protests on Tuesday in much of central Athens, and within a 100-metre (110-yard) radius of the route Angela Merkel’s motorcade will travel – although two planned protests elsewhere in the city will go ahead.
On Monday, public order minister Nikos Dendias appealed to protesters to “protect the peace, and above all our country’s prospects and our international image”, Reuters news agency reported.
Angela Merkel, a target for popular dissent, will be in Athens for about six hours, and will have talks with Greek Prime Minister Antonis Samaras.
The meeting is a gamble.
If there is chaos on the streets, it will only underline for the German public that Greece is a lost cause.
But Angela Merkel’s visit – her first to Greece in five years – is sending a symbolic message that she wants Greece to stay in the eurozone.
Meanwhile, the International Monetary Fund said on Monday that the global economic recovery was weakening, with government policies having failed to restore confidence.
It added that the risk of further deterioration in the economic outlook was “considerable” and had increased.
China has agreed to buy 50 planes worth $3.5 billion from Europe’s Airbus.
The agreement is part of a slew of trade deals signed by German Chancellor Angela Merkel at the start of a two-day visit to China.
An agreement on Airbus plane assembly in China was also signed, according to the Xinhua news agency.
Chinese Premier Wen Jiabao said on Thursday his country would continue to invest in the EU.
This is the first significant deal in China for Airbus, whose parent company is EADS, since a dispute between the country and the European Union over the Emissions Trading Scheme (ETS).
China has agreed to buy 50 planes worth $3.5 billion from Europe's Airbus
Effective from 1 January this year, the ETS charges airlines for the carbon they emit.
China and other countries say the system is not fair, as it charges airlines for the full journey, not just over European airspace.
Following this in March, EADS chief executive Louis Gallois said Airbus was facing “retaliation measures” by China.
According to him, China had blocked firms from buying planes made by Airbus. Beijing did not comment on the allegation.
Angela Merkel is in China for the second time this year, as she tries to improve relations and drum up business for European companies.
She is being accompanied by several ministers, as well as top German executives.
Bilateral trade between Germany and China totalled about $180 billion dollars last year. That is nearly double what it was five years ago.
On Thursday, the two countries signed 10 further agreements, in the sectors of communication, energy, health and maritime co-operation, among others, Xinhua said.
German Chancellor Angela Merkel and French President Francois Hollande are set to hold talks in Berlin on whether to give Greece more time to make the cuts required by its debt bailout.
Angela Merkel and Francois Hollande will also meet Greek Prime Minister Antonis Samaras later this week.
Meeting Antonis Samaras yesterday, eurozone chief Jean-Claude Juncker kept the door open for a change to the bailout terms.
Heavily-indebted Greece is in its fifth year of recession and austerity.
Greece is currently trying to finalize a package of 11.5 billion euros ($14.4 billion) of spending cuts over the next two years.
It is also being asked to put in place economic and structural reforms, including changes to the labor market and a renewed privatization drive.
The measures are needed to qualify for the next 33.5 billion-euro installment of its second 130bn-euro bailout.
Angela Merkel and Francois Hollande are set to hold talks in Berlin on whether to give Greece more time to make the cuts required by its debt bailout
The “troika” of donor bodies monitoring the bailout – the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission – are due in Athens next month to report on whether Greece has made enough progress.
Greece needs the funds to make repayments on its debt burden. A default could result in the country leaving the euro.
Antonis Samaras is seeking an extension of up to two years for the painful steps, in order to provide Greece with the growth needed to improve its public finances.
In an interview published on Wednesday, he told Germany’s biggest daily, Bild, that his country needed “a little breathing space” in order to kick-start growth and reduce its deficit.
After meeting Antonis Samaras on Wednesday, Eurogroup head Jean-Claude Juncker said a decision on an extension would depend on the troika’s report.
“We have to discuss the length of the period and other dimensions,” Jean-Claude Juncker told a news conference, while sitting alongside Antonis Samaras.
He said Greece was facing its “last chance” to make the necessary changes, but praised the “tremendous efforts” it has made so far to cut its deficit. He also stressed he was “totally opposed” to Greece leaving the euro.
Antonis Samaras called the discussions “fruitful”.
At least publicly, many EU leaders remain resolutely opposed to any moves to change the terms of Greece’s bailout.
But Jean-Claude Juncker’s remarks suggest there is room for manoeuvre and that an extension has not been ruled out.
Angel Merkel has said that she and Antonis Samaras will not make any decisions on the issue in their talks on Friday. Antonis Samaras goes on to meet Francois Hollande on Saturday.
On Wednesday, Francois Hollande also discussed Greece with British Prime Minister David Cameron in a telephone call.
“Both welcomed the recent actions of the ECB and agreed that this did not negate the need for Greece to stabilize their own economy and prevent any further detrimental effects to the wider eurozone,” David Cameron’s office said in a statement, without specifying which ECB actions they were referring to.
The talks come amid reports that due to the worsening state of the economy, which affects tax receipts and welfare spending levels, Greece may now need to find savings of up to 13.5 billion euros – 2 billion more than thought.
Greece discussions timetable
• 22 August: Greek PM Antonis Samaras meets Eurogroup chief Jean-Claude Juncker
• 23 August: Angela Merkel and Francois Hollande meet
• 24 August: Chancellor Merkel and PM Samaras meet
• 25 August: President Hollande and PM Samaras meet
• Early September: Troika staff go back to Greece
• 14-15 September: Gathering of European finance ministers in Cyprus
• Troika’s review of progress to be published by the end of September
• 8-9 October: Finance ministers attend two days of meetings in Luxembourg
Italian newspaper Il Giornale, owned by former Prime Minister Silvio Berlusconi, has caused controversy by printing a front page headline which said “Fourth Reich” above a picture of German chancellor Angela Merkel.
The picture in Il Giornale also showed Chancellor Angela Merkel raising her right arm in salute, a gesture associated with the Nazi salute used by Hitler’s followers.
The article, which was published on Friday, has heightened a bitter war of words between Italy and Germany over the handling of the ongoing Euro crisis.
The angry article attacked tough talking Chancellor Angela Merkel saying that her intransigence had brought “us and Europe to its knees” adding that “Italy is no longer in Europe but in the Fourth Reich.”
It went on to say: “In the First Reich, Germany also wanted the title Emperor of Rome and in the next two they used their own means again against the states of Europe, two world wars and millions of dead, obviously this was not enough to quieten German egomania.
“Once again it has surfaced but this time not with the use of cannon, this time it’s the Euro.
“The Germans believe it’s theirs and we have to submit, surrender, hand ourselves over to the new Kaiser Angela Merkel who wants to rule in our own house.”
Il Giornale, owned by former Prime Minister Silvio Berlusconi, has caused controversy by printing a front page headline which said “Fourth Reich” above a picture of German chancellor Angela Merkel
It is not the first time that Il Giornale has been at the centre of controversy with Germany – two months ago after Italy beat Germany in the Euro 2012 semi final they printed a picture of Chancellor Angela Merkel below the headline: “Ciao, ciao culona” which translates as “Bye bye lard arse.”
Last year it was alleged that Silvio Berlusconi, who stepped down as prime minister last November, had been taped calling the German leader “culona” although he has insisted they had a good working relationship and are still in touch – claims which have been denied in Berlin.
Germany has been at loggerheads with Italy over the handling of the ongoing Eurozone crisis and accusing Rome of not doing enough to get its finances in order to resolve the single currency problem which has been dragging on for two years.
Newspapers in Germany have repeatedly attacked the southern European economies of Greece, Spain and Italy for their poor performances and bail outs offered to them.
Il Giornale has repeatedly accused current Italian technocrat prime minister Mario Monti, of not doing enough to stand up to Germany, comparing him to Neville Chamberlain who famously declared in 1938 he had “secured peace in our time” after holding talks with Nazi dictator Adolf Hitler only for war to break out the following year.
In an interview with Germany weekly news magazine Der Spiegel, Mario Monti called on Chancellor Angela Merkel to show greater flexibility on how the European Union tackles the eurozone crisis and suggested there could be a backlash if this does not occur.
Chancellor Angela Merkel has repeatedly argued that the only way to restore confidence in the under-fire single currency in the long term is for eurozone countries to show budget discipline and concede sovereignty to achieve greater fiscal integration.
But Mario Monti said that “more flexibility” had to be given to eurozone countries who are trying to put their economic houses in order for Italy’s current policy of rigor and tough economic reforms to “have a future”.
He added that he had told Chancellor Angela Merkel he was very worried about “the growing resentment in the Italian parliament against Europe, against the euro and against the Germans”.
Mario Monti also added that leaders should not let themselves be tied down by the domestic agendas of their national parliaments in EU negotiations and said: “If governments let themselves be bound completely by the decisions of their parliaments without maintaining their own scope for negotiation, Europe is more likely to break up than it is to see closer integration.”
But within hours of the interview Chancellor Angela Merkel and German MPs hit back at Mario Monti.
Georg Streiter, a spokesman for the German leader, said: “The chancellor’s opinion is that we in Germany have always done well with the right balance between parliamentary support and the participation of parliament.”
While Foreign Minister Guido Westerwelle, said: “Parliamentary checks on European policy are beyond any debate. We need to strengthen, not weaken, democratic legitimization in Europe.”
Mario Monti is due to meet Chancellor Angela Merkel later this month in Berlin to again discuss the Eurozone crisis and today markets were positive as the spread between German and Italian bonds dropped.
German chancellor Angela Merkel says Jewish and Muslim communities should be able to continue the practice of circumcision, after a regional court ruled it amounted to bodily harm.
Angela Merkel’s spokesman said it was a case of protecting religious freedom.
Steffen Seibert said: “Circumcision carried out in a responsible manner must be possible without punishment.”
European Jewish and Muslim groups had criticized the Cologne court ruling.
The case involved a doctor who carried out a circumcision on a four-year-old that led to medical complications.
The court said that a child’s right to physical integrity trumped religious and parental rights.
Angela Merkel says Jewish and Muslim communities should be able to continue the practice of circumcision
But Steffen Seibert said: “For everyone in the government it is absolutely clear that we want to have Jewish and Muslim religious life in Germany.”
He said the government would look urgently at establishing “legal certainty”.
“It is clear this cannot be put on the back burner. Freedom to practice religion is a cherished legal principle,” Steffen Seibert said.
Germany’s Medical Association had told doctors not to perform circumcisions following the court ruling.
The doctor involved in the case was acquitted and the ruling was not binding. However, critics feared it could set a precedent for other German courts.
European Jewish and Muslim groups had joined forces to defend circumcision.
An unusual joint statement was signed by leaders of groups including the Rabbinical Centre of Europe, the European Jewish Parliament, the European Jewish Association, Germany’s Turkish-Islamic Union for Religious Affairs and the Islamic Centre Brussels.
“We consider this to be an affront [to] our basic religious and human rights,” it said.
Opinion in Germany about the issue has been mixed, though one poll showed a majority in favor of the ban.
He says that many readers’ comments on newspaper websites have indicated anger that this generation of Germans seems to be being constricted in its actions because of the Holocaust.
Thousands of Muslim and Jewish boys are circumcised in Germany every year.
German Chancellor Angela Merkel and her party Christian Democratic Union (CDU) are facing a tough task to avoid defeat in North Rhine-Westphalia election on Sunday.
Opinion polls in the key state of North Rhine-Westphalia suggest an emphatic re-election victory for the centre-left Social Democrats (SPD).
Analysts say voters look set to reject Angela Merkel’s tough line on fiscal discipline as a cure for state debt.
Recent polls in Greece, France and Italy have rejected austerity policies.
Voting in North Rhine-Westphalia ends at 16:00 GMT, with exit polls expected soon after.
The CDU and its national coalition partner, the Free Democrats, recently lost elections in the northern state of Schleswig-Holstein. The CDU scored its lowest tally in the state for 50 years.
The poll in North Rhine-Westphalia (NRW) will test the popularity of Chancellor Merkel’s CDU, as opposition to her strict austerity policies grows outside Germany.
NRW, Germany’s most populous state and with a large economy, has a history of influencing national politics.
The election was called in March after the state’s minority government, run by a coalition of the SPD and Greens – narrowly failed to get a budget passed.
Polls suggest that state premier and SPD candidate Hannelore Kraft will easily defeat CDU rival Norbert Roettgen, who is Angela Merkel's environment minister
Despite its troubles, polls suggest that state premier and SPD candidate Hannelore Kraft – who has headed the fragile government for the past two years – will easily defeat CDU rival Norbert Roettgen, who is Angela Merkel’s environment minister.
In her campaign, Hannelore Kraft has emphasized strengthening indebted local communities, investing in education and boosting the state’s business appeal.
Norbert Roettgen, on the other hand, has accused the SPD of financial irresponsibility, holding rallies dominated by a huge inflatable “debt mountain”, to emphasize the state’s problems.
He provoked controversy early in the campaign by refusing to commit to being a full-time opposition leader if he lost. Such a move would cost him his job in Berlin.
Angela Merkel said the election offered the region an opportunity to elect a government that would not take on “ever more debt”.
The Pirate Party, which has grown in strength recently with its calls for transparency and internet freedom, is looking to enter its fourth state parliament.
Nationally, Sunday’s election will not change the balance of power, whatever the outcome.
But opposition leaders warned it could send an important signal ahead of national elections expected in late 2013.
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German Chancellor Angela Merkel got a beershower.
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