THE SPD RALLIES AROUND BECK AND LOOKS TOWARD 2009

C O N F I D E N T I A L SECTION 01 OF 02 BERLIN 001977

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/30/2017
TAGS: PGOV PREL ECON AF IR GM
SUBJECT: THE SPD RALLIES AROUND BECK AND LOOKS TOWARD 2009
ELECTIONS


Classified By: Charge D'Affaires John M. Koenig for Reasons 1.4 (B,D).


1. (C) Summary: The Social Democratic Party's (SPD) October
26-28 convention gave a much-needed boost to party chairman
Kurt Beck, who emerged as the SPD's undisputed candidate for
chancellor in 2009. The SPD focused squarely on a domestic
agenda that should not directly affect our ability to work
with Germany on issues of international significance -- the
only foreign policy news at the convention was positive, with
the SPD approving continued participation in OEF and calling
for increased engagement in Afghanistan. In addition to
Beck's popular revision of previous unemployment insurance
reforms, unexpected grass-roots resolutions against railroad
privatization and for a national speed limit were forced on
the party leadership against its will, measures that push the
SPD somewhat to the left, though not as far as media
headlines would suggest. These shifts do not pose a threat
to the survival of Chancellor Merkel's Grand Coalition but
signal a more intense focus on the 2009 elections and
increasingly sharp competition between the SPD and CDU for
votes. As a result, the coalition increasingly will limp
along on domestic reform as the national elections approach.
There is still latent potential for SPD figures to play the
anti-American card again, as Beck did on Missile Defense
after Putin's February 2006 Munich speech, but these appeals
were notably absent in Hamburg. End summary.

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Beck Strengthened
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2. (C) The October 26-28 SPD national convention in Hamburg
was a success for a party that has had three chairmen since
2004, is suffering in the polls, and had recently fallen
victim to internal squabbling. Beck, a provincial figure,
whose popularity had sunk even among SPD supporters, was a
clear winner in Hamburg, re-elected with 95.5 percent as
party chairman. He is now poised to be the party's "natural"
candidate for chancellor in the 2009 parliamentary elections,
unless the SPD does poorly in the 2008 state elections in
Lower Saxony, Hesse, and Hamburg. Beck heaped generous
praise on the SPD government ministers in a bid to heal the
party divisions resulting from his power struggle with Vice
Chancellor and Labor Minister Franz Muentefering (ostensibly
centered on revisions to the law on unemployment benefits).
SPD contacts also pointed out that the election of the three
deputy chairpersons -- Foreign Minister Frank-Walter
Steinmeier, Finance Minister Peer Steinbrueck, and Bundestag
member Andrea Nahles was "ideal" in that Nahles -- who
represents the SPD's left -- received fewer votes than her
more centrist co-deputies. Her position in the inner party
leadership is aimed at helping to keep the left wing of the
party in line and attract alienated SPD leftists back from
the orbit of the new party "The Left." Berlin Mayor Klaus
Wowereit, the SPD left-winger with the broadest public
appeal, told the Charge October 29 that centrists maintained
their dominance at the convention.

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Bread-and-Butter, or a Roll-Back of Reform?
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3. (C) The convention celebrated the party's traditional
bread-and-butter domestic issues, with the slogans,
"Solidarity, Justice, and Freedom" and "Economic Upswing for
Everyone." The SPD's "Hamburg Program" sounds populist
themes, including a partial pullback from the "Agenda 2010"
reforms pushed through by Gerhard Schroeder's government, but
does not mark an abrupt shift to the left. The party called
for an extension of unemployment entitlements to a maximum of
two years for workers over 45 and a national minimum wage of
7.50 euros. Yet Beck and other SPD leaders were careful to
point out that the annual 1.1 billion euro (USD 1.6 billion)
cost of the benefits would come from the off-budget
unemployment fund, not affect the general budget (a CDU
redline),and would be coupled with further cuts in
unemployment insurance contributions that would make it
cheaper for firms to hire new workers (another CDU theme).
Polls have shown wide public support for such adjustments to
"Agenda 2010."


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Deutsche Bahn Privatization
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4. (C) Although the SPD convention was a much more scripted
event than the Greens convention a month earlier, the news in
Hamburg was not uniformly positive for Beck and the party
leadership. Against a backdrop of ongoing strikes by
locomotive engineers, the party faithful forced the SPD
leadership to review the proposed privatization of the

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state-owned railroad, Deutsche Bahn (DB),proposing instead
that 26% of the shares become "people's shares" without
voting rights (Volksaktien),with 51% remaining with the
government and only 23% being made available to a major
investor. It is unlikely that major investors -- who are
needed to recapitalize DB -- would accept these conditions.
So privatization -- the major infrastructure reform of the
decade -- could now be at risk, putting (SPD) Transportation
Minister Tiefensee, a major champion of privatization, in an
especially difficult position.

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Environmental Policy
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5. (C) In a rather feeble attempt to recapture some of the
ground that Chancellor Merkel occupies on climate change, SPD
delegates overturned the leadership and voted to introduce a
130-kilometer per hour (80 mph) speed limit on Germany's
highways to reduce C02 emissions. This was not welcomed by
the leadership, which tried to put the best face on the move
as a "symbolic" issue. The convention also restricted new
licenses for brown-coal power plants. Given the SPD's
steadfast opposition to nuclear power, the obstacles to new
coal plants, if adopted as government policy, could increase
Germany's already high dependence on Russian gas.

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Comment
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6. (C) Lagging behind the CDU by about 10 points in the
current polls, challenged as the "voice of the little man" by
the Left party, and having lost thousands from its membership
rolls, the SPD has been under intense pressure to
re-establish its identity. The convention signaled that the
party sees economic "justice" themes as the key to achieving
this goal. While the SPD did address foreign policy issues,
(including a caution by Steinmeier against "saber-rattling"
with respect to Iran),the party did not depart from its
known positions or initiate shifts that represent major
concerns for U.S. foreign policy. The new party platform and
the debate at the convention represent less a shift to the
left - as some in the media argued -- than a sharpening f
the SPD's independent profile in relation to te CDU and The
Left. With a renewed mandate and a new spring in his step,
Kurt Beck is better poisd to challenge Merkel in 2009. He
still has an phill batter. The question for the SPD now is
whther the party's new platform and its investment in Beck
are enough to improve the SPD's prospects as it heads into
the second half of the legislative term. The SPD's goal is
to win back the hearts of the disappointed party members and
traditional SPD voters by focusing on tried and true -- and,
based on polling figures, very popular -- social and economic
justice themes from the pre-Schroeder era, especially before
key state elections early next year. This will leave little
room for further work on the Grand Coalition's already modest
domestic legislative program.
KOENIG