Merkel vows to fight leftist shift before key talks

BERLIN, Nov 4 (Reuters) German Chancellor Angela Merkel vowed today to resist a shift to the left by her Social Democrat (SPD) partners ahead of a key meeting of coalition leaders to resolve disputes on a range of issues.

Miserable opinion poll scores, looming state elections and the challenge of left-wing party Die Linke, or the Left, have prompted SPD leader Kurt Beck to chart a new left-leaning course which seeks to win back voters disillusioned with his party.

This has stoked conflict in the coalition on issues including extending jobless benefit payments to older people, a minimum wage, the part-privatisation of state rail operator Deutsche Bahn and reinstating commuter tax breaks.

Government leaders, including Merkel and Beck, will meet at 2000 hrs (0030 ist) today to hammer out their differences, with discussions expected to continue into the early morning hours of tomorrow.

Before that meeting, Merkel said she was not prepared to reverse reforms to the economy and reiterated that cutting unemployment, supporting economic growth and solid public finances remained her priorities.

''We should not put at risk what has been achieved,'' she told the Welt am Sonntag weekly, adding that her government had won a reputation for reliability with voters that had to be protected.

''I will only support policies that do not call this trust into question,'' she said. ''That means: solid finances, a balanced federal budget by 2011 and a further reduction of non-wage labour costs.'' Analysts say Beck's move left may result in a rolling back of reforms to Europe's biggest economy that are credited with supporting economic growth and boosting employment. They fear this could lead to a reversal of gains in competitiveness.

UBS economist Martin Lueck said that while an SPD proposal to extend jobless benefits to older workers would not make much of a difference on its own, the issue had become a symbol for a broader German debate about social justice.

''This is a debate that politicians seem to be now starting to see as a serious threat, especially with elections drawing nearer,'' he said.

''The natural reaction is therefore to soothe their voters' worries of growing social inequality, old-age poverty and a work life exposed to the forces of globalised markets.'' Although the German economy grew at its best rate in six years last year and unemployment has declined steadily since Merkel took office, the SPD has sought to exploit lingering concerns about income inequality and purchasing power.

The latest opinion polls put the conservatives on around 40 percent with the SPD trailing by as much as 14 percentage points and Die Linke on around 10 per cent.

Merkel's vow to stand her ground against the SPD comes amid mounting criticism in the German and international press of her domestic performance.

US weekly Newsweek splashed a picture of a glum-looking Merkel on its cover last month next to the title ''Lost Leader'', attacking her for abandoning the reform-drive she had promised voters before she was elected two years ago.

REUTERS ARB KP1750