State vote, coalition poker spell tough week for German Chancellor

After 12 years at the helm of the EU's top economy, the veteran leader faces one of her toughest challenges yet -- a political poker game with two very different players that could drag on well into 2018.

The goal is to form Germany's first coalition government grouping Merkel's restive conservative camp, the liberal and pro-business Free Democrats (FDP) and the left-leaning and environmentalist Greens.

If they fail to reach an agreement -- a distinct possibility, given their stark policy differences -- Merkel would have to call fresh elections, months after she won the September 24 polls with her party's lowest score in decades.

But before Merkel launches into those nightmare negotiations next Wednesday, she once more hits the campaign trail to support her Christian Democrats (CDU) in the western state of Lower Saxony.

"The goal is a strong CDU," declared Merkel ahead of a string of stump speeches in Germany's fourth most populous state, which is home to auto giant Volkswagen.

Her party is running neck-and-neck there with the governing Social Democrats (SPD) -- who are badly in need of a win after a heavy defeat at the national level that sent its leader Martin Schulz into opposition.

"A victory in Lower Saxony is important for Merkel because it would strengthen her and show that her party can still win state elections," said Oskar Niedermayer of Berlin's Free University.

Political scientist Michael Broening said a state-level win would "throw a lifeline" to party chairman Schulz, the former president of the European Parliament.

It would also "reassure a struggling party that there is a light at the end of the tunnel and that the future holds more than just a role in the opposition," said Broening, of the SPD-linked Friedrich Ebert Foundation.

Looming conflict

Days before the Lower Saxony election, the outcome was unpredictable after the CDU under challenger Bernd Althusmann lost an early lead to poll around even with the SPD, at 32 to 34 percent each.

The snap election was forced when the government of SPD state premier Stephan Weil lost its wafer-thin majority due to the defection of a lawmaker of its coalition partner the Greens to the CDU.

Whatever omen the Lower Saxony poll brings for Merkel's party, it is a sideshow to the big game she will focus her energy on after, forging a ruling alliance for her fourth-term government.

The strange grouping has been dubbed "Jamaica" because the parties' colours match those of the Caribbean country's flag -- black for the conservatives, yellow for the FDP, and green.

In coming weeks, their leaders will not just haggle about ministerial posts but also red-line policy issues that are sometimes diametrically opposed.

The CDU's Bavarian allies the CSU have signalled a tough stance on immigration to win back voters who have drifted to the far-right Alternative for Germany (AfD).

The FDP, who made a comeback after a dismal previous governing stint in the shadow of Merkel, have signalled they will oppose any steps to revive Europe that will unduly burden German taxpayers.

The Greens, more welcoming to refugees, and proponents of European "solidarity", will push signature issues on climate and renewable energy likely to be opposed by the more pro-business parties.

Setting the tone of looming conflict, the CSU's Alexander Dobrindt has warned the Greens that "we won't tolerate any left-wing nonsense", earning him a sharp rebuke from that party's Katrin Goering-Eckardt for his "bad-mouthing" a potential governing partner.

All players are highly reluctant to make major concessions, said Niedermayer -- the FDP because it has previously wilted in Merkel's shadow, the Greens because they face their environmentalist base and the CSU because it must win Bavarian elections next year.

"So, I'm still very, very sceptical," said Niedermayer.

"But of course it is also clear that all sides are under great pressure. Because the alternatives -- a minority government or fresh elections -- are something the German people do not want."