(Bloomberg) -- They control the purse strings in Europe's largest economy and yet Germany's Social Democrats aren't really happy.
Ever since they renewed their coalition with Chancellor Angela Merkel's Christian Democrats early last year, their drop in popularity has just accelerated. Once the most powerful force in Germany, the 156-year-old SPD today is tied for a distant third place at 13% with the populist AfD. Some blame a slowing economy, others say the party betrayed its working-class DNA and zigzagged on policies during a rudderless 15-year period that saw it run through 10 leaders.
The debate over whether to exit government and return to its leftist roots has been at the heart of a race to head the party in recent weeks. The results will be announced late on Saturday. While the campaign may still go to a run-off vote in late November, the outcome will determine the direction and even the survival of Merkel's coalition.
"The SPD leadership faces the dilemma that many members want to leave the grand coalition but it wants to continue to govern," said Manfred Guellner, head of polling firm Forsa. "Many think they can score with voters if they exit."
The man most interested in maintaining the coalition is Finance Minister Olaf Scholz, the Social Democrat who controls the country's budget and is Merkel's deputy. He argues the SPD is achieving more in government than it would in opposition. To recover popular support, it must advertise its accomplishments better and be more consistent on policies, he said.
"Some have been renewing themselves in opposition for 50 years without ever having governed," Scholz said in an interview with T-Online when asked whether the compromises made in the coalition didn't damage the party's image.
His party comrades in Thuringia, where state elections are held this Sunday, might disagree. There the SPD languishes in the single digits, with less than half the support of parties both to its right and to its left.
A victory for Scholz would bolster his potential to bid for the country's top job when Merkel's term ends in 2021. Failure to make it to the run-offs could debilitate the 61 year-old labor lawyer, though he would only resign as finance minister if his party officially votes to leave the coalition, according to a person with knowledge of his thinking.
Government critics in the party haven't been shy during the campaign as to the radical changes they would implement if they came to power. At the last of the 23 regional debates in Munich last week Norbert Walter-Borjans, the former finance minister of North Rhine-Westphalia, reaped a thunderous applause for his proposal to tax the rich and abandon zero-deficit spending, a symbol of Germany's fiscal discipline and its status as a safe haven.
"We can't give in so as to strangulate ourselves with a black zero," said Walter-Borjans, referring to the balanced budget policy.
Due to the relatively large number of candidates, it's likely nobody will obtain the necessary 50% majority to avoid a second round vote in late November. Polls suggest Scholz and his female running mate from the state of Brandenburg should make it to the runoff between the top two finishers. Other observers cautioned the race was open.
Even if Scholz wins it won't be easy to contain disgruntled leaders wanting to return the party to the left. They want to force Merkel into a series of concessions from welfare spending, to rent caps and a minimum pension.
"Everybody knows that we can't ever get anything through in this grand coalition," said deputy caucus leader Karl Lauterbach, who is running with environmental speaker Nina Scheer. If they win, they propose to hold a referendum on exiting the coalition.
Still, the fear of losing big in a snap election has kept the Social Democrats in place for nearly half of Merkel's fourth and last term. The risk of triggering a vote could do so for the rest of it, said Carsten Nickel, an analyst at Teneo Intelligence in London.
"There might be little other choice but to keep staggering on alongside Merkel," said Nickel.
--With assistance from Patrick Donahue and Zoe Schneeweiss.
To contact the authors of this story: Birgit Jennen in Berlin at bjennen1@bloomberg.netRaymond Colitt in Berlin at rcolitt@bloomberg.net
To contact the editor responsible for this story: Ben Sills at bsills@bloomberg.net, Richard Bravo
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