Merkel Highlights Economy in German Election Year

By Geir Moulson

BERLIN -- Chancellor Angela Merkel highlighted Germany's economic strength as she kicked off campaigning Saturday for an important state vote that comes months before national elections, and she brushed aside worries about the weakness of her party's coalition partner.

Merkel's center-right party faces a tough battle to extend its 10-year hold on Lower Saxony state, a northwestern region of 8 million people, in the Jan. 20 election there. Polls suggest the center-left opposition has a good chance of winning, which would give it a significant boost ahead of September national elections in which Merkel will seek a third term.

Merkel made clear that her Christian Democrats will make "economic competence, together with jobs -- and jobs that are well-qualified and fairly paid," along with economic strength, a keystone of this year's campaigns. She identified opposition plans for tax increases as one battleground.

"We believe that we do, of course, need income for the state, so we are not talking about tax cuts at this point," Merkel said at a televised news conference after her party's leadership met in Wilhelmshaven, a port city in Lower Saxony.

"But we believe that tax increases ... are not good for current economic developments, for medium-sized companies in particular but also for big companies," she added.

The number of Germans out of work averaged just under 2.9 million last year, the lowest since 1991. Germany's jobless rate of less than 7% contrasts with figures well over 20% in troubled eurozone partners Greece and Spain.

The strong German economy, and Merkel's hard-nosed management of Europe's debt crisis, have helped keep her popularity high and her party ahead in polls.

But the weakness of the pro-market Free Democratic Party, her junior coalition partner, means that her center-right alliance lacks a majority in surveys. The party, which campaigned at Germany's last election for tax cuts that it failed to obtain, has taken much of the blame for frequent coalition squabbling.

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