Former Merkel rival Friedrich Merz aims to become German chancellor

By Sarah Marsh

BERLIN (Reuters) - Squeezed out of top-level politics by his arch party rival Angela Merkel more than two decades ago, Friedrich Merz is on course to land his first ever government job: as Germany's next chancellor.

The conservative Christian Democrat Party (CDU) and its Bavarian sister party, which together are topping nationwide polls, on Tuesday agreed to nominate Merz, 68, as candidate for chancellor in next year's federal election.

A wealthy corporate lawyer who took a long hiatus from politics after losing a power struggle within the CDU to Merkel in 2002, Merz is widely considered a polar opposite in both style and policy to the woman who led Germany for 16 years.

Where Merkel was a consensus-driven, even-tempered pragmatist who shifted the CDU more towards the centre, Merz is a brash and provocative economic liberal who advocates for a revival of Christian values and has pulled it back to the right since being elected CDU chief almost three years ago.

He has been heard railing in recent months against Berlin's handling of migration - marked by Merkel's own open-door policy - calling instead for asylum seekers to be turned away at German land borders.

A Catholic father-of-three, married to a judge, Merz hopes to win back voters from the anti-migrant Alternative for Germany (AfD) which this month became the first far-right party to win a state election since World War Two.

In the process though he has made a series of populist statements - such as accusing some Ukrainian refugees of "social welfare tourism" and the children of some Muslim immigrants of being "small pashas" with no respect for authority - that CDU insiders fear could alienate more centrist voters.

The conservative premier of North Rhine-Westphalia, Germany's most populous state, Hendrik Wuest, once considered a rival for the chancellor candidacy, earlier this year warned in a newspaper column the CDU should stick to Merkel's "policies of modernity" rather than "scoring cheap points".

In what his critics call a sign of his thin skin, Merz, who towers over his opponents at nearly 2 meters (6.6 ft) tall, made an unusual public dig at Wuest in response.

"He is sensitive and quickly vexed, especially when he feels unjustly treated," said Jutta Falke-Ischinger, co-author of an unofficial biography on Merz titled "The Unyielding One". "He doesn't have much impulse control."

However, Falke-Ischinger said Merz was more decisive than current Chancellor Olaf Scholz, who is accused of dithering by his opponents.

"He (Merz) has an open ear for everything and everyone, is reliable; once he says something, he does it," she said.

LOW POPULARITY RATINGS

Merz, a protégé of the late CDU grandee Wolfgang Schaeuble, clinched the job as party chief by dint of persistence and by appealing to grass-roots members frustrated with what they viewed as Merkel's sellout of its core principles, said Alexander Clarkson, a lecturer for German studies at King's College London.

"But he does not have much deep support in the party and is one blunder away from coming under enormous internal pressure," he said.

The conservatives, which scored their worst ever result in the 2021 election, have since risen in polls to around 33% although analysts say that is relatively modest given the unpopularity of Scholz's fractious coalition.

Merz, like Scholz, has long languished in politician popularity rankings although his star has risen slightly of late.

"He lacks popularity but maybe you don't need that in these times but rather you need to show strength - which he does," said a high-ranking CDU politician, speaking on condition of anonymity.

"DARE MORE CAPITALISM"

Merz, who grew up in a small western town as the eldest son of a judge, was pushed out of his role as CDU parliamentary leader by Merkel in 2002 and left the Bundestag in 2009 in order to pursue a successful business career.

The amateur pilot, who disclosed in 2018 that he was earning around 1 million euros ($1.1 million) a year, has worked on the advisory and supervisory boards of several major companies from Commerzbank to BASF. He was also chairman of the German arm of BlackRock, the world's biggest fund manager.

Critics accuse him of being out of touch with ordinary Germans and prone to representing the interests of corporate elites over the people. His decision to fly a private plane to the wedding of Finance Minister Christian Lindner in 2022 in a country wary of ostentation sparked controversy.

Supporters say his private sector experience can help him better understand how to reboot a stagnant economy.

Merz, the author of 2008 book "Dare more capitalism," has said he wants to reduce social benefits and taxes particularly on companies. He also wants to simplify Germany's notoriously complex tax system; annual tax returns should be so simple you could write them on a beer mat, he once said.

The government should create more competitive conditions for all firms for example by lowering energy prices and foster innovation rather than certain sectors like e-mobility, according to Merz, who long opposed Germany's exit from nuclear power.

Carsten Brzeski, global head of macro at ING Research, said the main problem with the proposals was that Merz had not spelled out how he would finance them.

"Merz’s economic policy proposals all make sense but are typical opposition proposals and not yet constructive ideas for a next government," he said.

CHURCHILL FAN

Merz's fiscal conservatism, in particular his opposition to common European debt, could also put the brakes on ideas to boost EU growth, for example through higher public investment.

Still, Merz, who started his political career as a European lawmaker, has described himself as a "a truly convinced European" and advocated for a closer union, in particular on defence and foreign policy.

This and his more hawkish stance on both Russia and China arguably make him more aligned with French President Emmanuel Macron, whom he visited in Paris late last year, than Scholz is, according to Eurasia Group. British World War Two leader Winston Churchill is the politician who has marked him most, he says, other than Schaueble.

Merz has also described himself as "a convinced transatlanticist", chairing the "Atlantic Bridge", a non-profit fostering U.S.-German ties, for ten years.

His ability to put into place any of his ideas will depend in part on his ability to form a coalition with the very three ruling parties he has now spent years attacking, given he - like all leaders of mainstream parties - has ruled out working with the AfD.

"As chancellor he might cater to that growing desire for politicians with clear convictions after the Merkel and Scholz years," said Carsten Nickel at political risk consultancy Teneo. "But German politics is all about compromise in the end, and that might be something that comes less naturally to Merz."

($1 = 0.8980 euros)

(Reporting by Sarah Marsh; Additional Reporting by Andreas Rinke and Thomas Escritt; editing by Matthias Williams and Keith Weir)