Merkel to make election pledges worth billions

Three months before Germany goes to the polls, Angela Merkel's conservatives were to agree on billions of euros in election pledges Sunday, sparking criticism from within her ruling coalition that the European austerity champion is showering voters with costly campaign gifts.

While the opposition Social Democrats labelled the manifesto "insincerity in print", Merkel's vice chancellor, from junior coalition partner the Free Democrats, charged that her party, in election mode, had succumbed to "the sweet poison of spending".

Key proposals of Merkel's Christian Democratic Union (CDU) have been released ahead of the Berlin party meeting, where 120 top delegates were expected to sign off on the manifesto for the September 22 vote.

According to a draft, the CDU and its Bavarian sister party the CSU have earmarked 25 billion euros ($33 billion) alone over four years to upgrade the highway system of what is often said to be a car-obsessed nation.

The CDU -- which under Merkel has adopted many signature issues of the centre-left opposition -- would also extend tax breaks for families with children, raise pension entitlements for stay-at-home mothers, and work to cap annual housing rent hikes.

Party chief Merkel and CSU leader Horst Seehofer were due to attend the party meeting from 1300 GMT and then both speak at a 1630 GMT press conference, ahead of a wider party conference with up to 500 members on Monday.

Merkel -- Germany's most popular politician for what is widely seen as a no-nonsense and pragmatic leadership style -- remains the favourite to win a third term, although small swings in party support could force her to find a new coalition partner.

Before Sunday's event, the policy proposals drew fire from the opposition Social Democratic Party (SPD), which under its top candidate Peer Steinbrueck has struggled to build campaign momentum as it seeks to win power in alliance with the Greens Party.

The SPD's party's parliamentary chief Thomas Oppermann labelled the CDU plans "insincerity in print" and charged that Merkel, having failed to implement real reforms, was now "promising everything under the sun".

Merkel was trying to create the impression "that you can spend 40 billion euros on election gifts and still consolidate the budget", he was quoted as saying by the Rheinische Post daily.

Criticism also rained down from within coalition ranks, as Economy Minister Philipp Roesler, the vice chancellor, attacked Merkel's plans for a spending spree at a time when Germany, like other eurozone countries, needed fiscal discipline.

Roesler, head of the pro-business Free Democratic Party (FDP), accused the CDU of succumbing to "the sweet poison of spending" in an interview with the Handelsblatt business daily. He also criticised the "very soft" wording on taxes which he said failed to explicitly rule out future tax hikes.

Roesler pledged that his FDP would not allow tax rises and warned that Merkel's conservatives had to face the fact "that they cannot govern alone and have to make compromises".

CDU parliamentary group chief Volker Kauder said his party remained committed to fiscal consolidation and promised that under current tax revenue projections all the promises could be paid for.

Speaking with the Welt am Sonntag newspaper, he also pointedly advised the FDP that, instead of undermining Merkel, it should attack their political opponents in the SPD, Greens and Left parties.

For Merkel, whose CDU is Germany's strongest party in the opinion surveys, the biggest threat comes from the FDP, which has in recent months polled dangerously close to, and at times below, the five percent threshold for re-entry into parliament.

If the FDP were to crash out in the coming election, Merkel would be expected to either seek a "grand coalition" government with the SPD or, as an outside possibility, team up for the first time at the national level with the Greens party.