Merkel Coalition In Balance As Ally Loses SPD Leadership Race

The future of Chancellor Angela Merkel's coalition was thrown into question on Saturday as her deputy chancellor and finance minister lost the leadership race of his centre-left party SPD.

The humiliating defeat for Olaf Scholz marks another sign of discontent within the Social Democrats over their partnership with Merkel's centre-right party.

It was also a prelude to expected high drama in the coming week with the party poised to vote on whether to stay in the coalition as delegates meet for their annual congress from Friday.

Scholz and his running mate Klara Geywitz, who back staying in the coalition til 2021, obtained only 45.33 percent of the vote of the party's rank and file.

They were soundly beaten by challengers Norbert Walter-Borjans und Saskia Esken, who won with 53.06 percent, and who have been highly critical of the alliance with the conservatives.

Scholz said the party must now "stand behind the new leadership".

For the business-friendly FDP party, the shock result means that "Germany stands before new elections or a minority government".

The far-right AfD also predicted an end of the coalition, with its co-leader Joerg Meuthen forecasting that "it will break up".

Anxious to calm jitters, the general secretary of Merkel's CDU Paul Ziemiak came out to say that "the decision today has changed nothing" about the alliance -- a message echoed by the CDU's Bavarian sister party CSU.

Wounded by an election rout in 2017, the SPD had initially sought to go into opposition, but allowed itself reluctantly to be coaxed into renewing an alliance with Merkel.

Many within the party however remained wary of continuing to govern in Merkel's shadow, and the coalition has lurched from crisis to crisis.

The SPD has also been battered by a series of regional and European election setbacks this year.

After voters handed the party its worst outcome in European elections in May, the party's then leader Andreas Nahles threw in the towel, triggering the leadership contest.

In an attempt to shake up its image, the SPD has turned to a new leadership format -- a male-female duo for the first time since its founding in 1890 -- a model copied from the surging Greens.

In the latest opinion polls, the SPD, which came second in the 2017 federal election, is struggling for third place with the far-right AfD, behind the CDU and the Greens.

Relatively unknown in Germany's political scene, the SPD's new leaders Esken and Walter-Borjans stand further left on the spectrum within the party.

They have been critical of the government's "black zero" policy of not taking on new debt -- something that Scholz has championed -- and its perceived timidity in tackling climate change.

They enjoy the support of the youth wing of the party and of the German branch of Fridays for Future -- the environmental movement set up by Swedish teen Greta Thunberg which has a large following in Germany.

The duo has said they will push the coalition to agree to billions more in investments on the climate and infrastructure.

Failing that, they have threatened to pull the plug on the coalition.

For analysts, the SPD needs to quit the government if it wants to survive.

"The SPD cannot renew itself unless it is in opposition and has new people," said political expert Klaus Schroeder.