Bloomberg - 29 Jun 09

Prof. Robert B. Laughlin
Department of Physics
Stanford University, Stanford, CA 94305
(Copied 22 Aug 09)

Merkel Retreats on Nuclear Power, Backs Electric Cars

By Tony Czuczka
June 29, 2009 08:36 EDT

June 29 (Bloomberg) -- Chancellor Angela Merkel's party ruled out for the first time building nuclear-power plants in Germany and backed plans to develop electric-car technology, aiming to broaden its appeal for Sept. 27 national elections.

While Merkel's Christian Democratic Union and its Bavarian sister party, the Christian Social Union, agreed to stick to a policy of extending the lifespan of existing atomic plants, their joint campaign program presented in Berlin today describes nuclear power as merely a "bridge" to greater use of renewable energy.

"The language can be interpreted so broadly that everyone can agree with it -- supporters of nuclear power as well as opponents," Karin Brinkmann, an energy analyst at Unicredit Group in Munich, said in a phone interview.

Merkel's shift on nuclear power underscores an effort to attract enough support to ditch her Social Democratic coalition partners and ally with the pro-business Free Democrats after the election. Merkel and her challenger, Foreign Minister Frank-Walter Steinmeier, are fighting for votes amid the worst global recession since World War II. Foreign sales account for one in every three jobs in Germany, the world's biggest exporter.

on plans for education, integration and the need for global financial-market regulations, Merkel didn't mention nuclear power. She highlighted the challenge to German industry posed by President Barack Obama's policies on fighting global warming.

Single Goal

"We have to pick up the pace" of developing green technologies, Merkel told the party convention, citing cars and wind turbines. "We have a single goal: quickly pulling our country out of the depths to make it internationally strong."

Merkel's campaign platform includes plans for what she called "moderate" tax cuts, even as she supports efforts to curb the budget deficit. The fiscal shortfall will rise to 6.2 percent of gross domestic product next year from 3.7 percent in 2009, according to the Organization for Economic Cooperation and Development. No timeline is set for the tax cuts in the program, which was approved unanimously by party leaders yesterday.

Merkel's bloc would pare the lowest income-tax bracket to 12 percent from 14 percent and raise the threshold for the 45 percent top rate to 60,000 euros ($85,000) from 52,000 euros. The Social Democrats, known as the SPD, are campaigning to raise the top rate of income tax to 47 percent while cutting the level at which it kicks in. The SPD wants to cut the lowest tax rate to 10 percent.

Electric-Car Technology

The CDU/CSU program aims to build on Germany's automotive expertise to make it a "world leader" in electric cars. A model region will be identified to develop electric-car technology, with the aim of putting at least 1 million vehicles on the road by 2020.

While Merkel and German utilities want to overturn a policy backed by the Social Democrats to close Germany's 17 nuclear plants by about 2021, the Christian Democrats watered down their stand on nuclear energy compared to 2005, said Gerd Langguth, a University of Bonn political scientist and Merkel biographer.

In 2005, Merkel saw a 23 point opinion-poll lead over then Chancellor Gerhard Schroeder's party shrink to a single point on election day, forcing her into a grand coalition with her Social Democratic rivals.

"This platform is meant to signal that the Christian Democrats are open to all parties, except the Left," an anti-capitalist group led by former Finance Minister Oskar Lafontaine, Langguth said in an interview.

No Nuclear Panacea

Merkel, a former environment minister under Chancellor Helmut Kohl, renewed her support for nuclear power in a June 24 speech to an energy industry conference, while adding it "will not solve all our problems."

RWE AG, E.ON AG, Energie Baden-Wuerttemberg AG and Vattenfall AB operate nuclear plants in Germany. The next government's nuclear policy may boost shares of E.ON and RWE, UBS analyst Peter Crampton in London said in a June 22 note.

"Nuclear is part of the future," Lars Josefsson, chief executive officer of Vattenfall, said in a June 24 interview. "I'm sure it's going to be discussed over the next years, but how that's going to turn out, I don't know at the moment."

The OECD lowered its outlook for Germany June 24, saying the Europe's largest economy will manage only 0.2 percent growth in 2010 after shrinking 6.1 percent this year.

Merkel's bloc has benefited the most of the coalition parties from its handling of the crisis. The CDU/CSU shed one percentage point to 35 percent support compared to 24 percent for Steinmeier's Social Democrats, also down one point, an Infratest poll showed June 26. The Free Democrats, led by Guido Westerwelle, had 15 percent, enough to form a coalition with Merkel's party. Infratest polled 1,000 voters June 23-24 with a margin of error of as much as 3 percentage points.