Merkel coalition partner warns against higher state spending

BERLIN (Reuters) - The leader of Chancellor Angela Merkel's junior coalition partner chided her over spending promises made ahead of September's federal election and said now was not the time to abandon "economic sense".

Merkel, whose center-right Christian Democrats (CDU) are well ahead in opinion polls, has signaled that more funds will be made available for families and for infrastructure projects if she wins a third term in office.

"I urgently advise staying in the realm of economic sense. Social policy promises like those now being proposed by the CDU have to be financially feasible," Philipp Roesler of the liberal Free Democrats (FDP) told the Welt am Sonntag newspaper.

Germany must not abandon its aim of achieving a balanced budget, said Roesler, whose pro-business party is a staunch advocate of fiscal discipline.

The top-selling Bild daily on Saturday put a price tag of 28 billion euros on Merkel's spending promises and said it showed Germany's election campaign had finally begun.

"The euro and financial market crises are already yesterday. Four months before the federal election the parties criss-cross the country promising citizens what they supposedly want to hear," said Bild in a commentary in Sunday's edition.

Finance Minister Wolfgang Schaeuble, a close Merkel ally, denied in a statement to Reuters any weakening of government resolve to cut public debt, though he said he saw scope for some modest additional spending in priority areas.

In Sunday's interview, Roesler criticized the European Commission's decision to grant France and Spain more time to reduce their budget deficits, saying it sent a "wrong signal" that could harm confidence in Europe's readiness to reform.

Strong economic growth, buoyant tax revenues and lower unemployment have helped Germany, Europe's biggest economy, to reduce its borrowing costs despite the ongoing euro crisis. German public debt nevertheless remains well above the EU's 60 percent ceiling at over 80 percent of gross domestic product.

In some good news for Roesler, an opinion poll conducted by the Emnid pollster for the Bild am Sonntag newspaper showed support for his FDP at 5 percent, just enough to win seats in the Bundestag lower house in September's election.

The FDP has sometimes dipped below the 5 percent threshold in opinion polls, raising doubts over whether Merkel will be able to renew the current center-right coalition.

The most likely outcome if the FDP fails to get back into parliament would be a 'grand coalition' between Merkel's conservatives and the main opposition Social Democrats (SPD) like the one she led from 2005 to 2009.

In Sunday's survey, Merkel's Christian Democrats and their Bavarian allies the Christian Social Union (CSU) remained steady at 40 percent, the SPD was on 26 percent, its Green allies on 14 percent and the former communist Left on 7 percent.

(Reporting by Gareth Jones; Editing by Robin Pomeroy)