BERLIN (Reuters) – German conservative party headquarters is rocking. To the heavy thud of AC/DC, hundreds of young party members throng the foyer of Konrad Adenauer House in Berlin waving posters and talking over the music.

Music over, they listen with rapt attention and regular applause to Germany’s most popular politician — approval rating a record 74 percent — speak about passion and leadership. With Germany taking on a more assured and outspoken role in Europe, its economy moving into what the economy minister has called an “XL recovery”, and no national elections to worry about for three years, there’s every reason for Angela Merkel’s government to bask in the glow of success.

Unfortunately for the German chancellor, neither she nor her Christian Democratic Party (CDU) is the object of the chants and adulation at this rally of young conservatives on a Saturday afternoon in October. Instead, the calls — “KT! KT! KT!” — refer to Merkel’s debonair 38-year-old defense minister from the CDU’s smaller, more conservative Bavarian sister party, the Christian Social Union (CSU). “KT” is Karl-Theodor zu Guttenberg — or to give him his full dues, Karl Theodor Maria Nikolaus Johann Jacob Philipp Franz Joseph Sylvester, Baron von und zu Guttenberg. Pictures of Guttenberg and his wife Stephanie, the great-great-granddaughter of the “Iron Chancellor” Otto von Bismarck — architect of German unification in the 19th century — frequently decorate the covers of newspapers and magazines.

It may surprise many, especially those outside Germany, that the young noble is even considered a serious rival to the woman widely known as the new Iron Chancellor. But with the ruling coalition struggling in the polls, and some party insiders accusing her of weak leadership and a lack of enthusiasm, Merkel is beginning to look like a politician fighting for survival. In a Forsa survey in mid-October, 23 percent of respondents said Guttenberg would make a better chancellor than Merkel, with just 14 percent preferring the incumbent. More strikingly, nearly half the Germans polled saw no difference between the two leaders’ abilities — something of an insult to the 56-year-old chancellor, re-elected just a year ago and in the front line of German politics for almost two decades.

Guttenberg, who entered parliament just eight years ago, may turn out to be a flash in the pan. But his rise does highlight a contradiction about Angela Merkel: after five years as the most powerful person in Germany, her star seems to be waning at home even as it rises abroad. “There seem to be two Merkels — one abroad, one at home,” says Eberhard Sandschneider, research chief for the DGAP foreign policy think-tank. “It is a pattern in German politics and is similar to what her predecessors Helmut Schmidt and Helmut Kohl experienced.”

IRON CHANCELLOR OF EUROPE

In person, Merkel comes across as a supremely confident politician of growing global stature. Unemployment is at an 18-year low and Germany, unlike historic rivals France and Britain, has avoided the drastic austerity measures that have filled French streets with protesters and will chop almost half a million public-sector jobs in Britain. The economy, motoring along at 2.2 percent growth, looks likely to expand steadily from now until her second term ends in 2013. Germany’s growing assertiveness on the international stage has just been cemented by a new two-year turn on the United Nations Security Council.

BERLIN (Reuters) – Germany’s undiplomatic outbursts against U.S. policy, calling it “clueless” before a G20 summit, show growing estrangement on economics as America’s focus shifts away from transatlantic ties to domestic challenges and Asia.

“The Atlantic is getting wider,” said Anton Boerner, head of Germany’s Foreign Trade Association, who spoke of a “creeping alienation” between America and Europe, which has been exacerbated by the global financial crisis.

Germany and the United States often criticize each other’s approaches to aiding economic recovery, with U.S. calls for more expansive policy falling on deaf ears in fiscally disciplined Germany. But Berlin has taken the rhetoric to a new level.

Finance Minister Wolfgang Schaeuble, 68, said last week that the U.S. Federal Reserve decision to buy $600 billion of government bonds undermined U.S. credibility and was “clueless.” There was no point, he said, in pumping money into the markets.

China and Brazil were among those echoing his comments but U.S. officials were particularly stung by Schaeuble and German Economy Minister Rainer Bruederle saying the Fed move amounted to “indirect manipulation” of the dollar to boost exports; this at a time when Washington is criticizing China for exactly the same kind of strategy.

“It’s not acceptable for the Americans to criticize China for currency manipulation then slyly help the dollar by printing at the Federal Reserve,” Schaeuble told Der Spiegel magazine.

Coming ahead of a G20 summit in Seoul where nerves about trade and currency imbalances will top the agenda, the comments were strong even compared to the frank tone that U.S. Treasury Secretary Timothy Geithner uses with the Germans and others.

BERLIN, Oct 28 (Reuters) – France believes European Union leaders will adopt a Franco-German deal on budget rules at their summit on Thursday and Friday and dismissed as a “nuisance” an EU official who called the bilateral initiative irresponsible.

Leaders are expected to agree sanctions for member states that violate deficit and debt rules, but Germany and France have caused upset with an independent deal seeking changes to the EU treaty in order to guarantee long-term fiscal discipline.

French European Affairs Minister Pierre Lellouche said in Berlin on Thursday that some “dramatisation” was inevitable at the summit, but “there is a sense of realism that will triumph at the end of the day, maybe not already tonight”.

He rejected criticism that the two euro zone giants were dictating policy, telling reporters: “It is no diktat, it is a Franco-German present to Europe. Of course it is not aimed at dictating from the big to the small, that is ridiculous.”

Germany wants limited amendments to the EU’s Lisbon treaty to allow for a permanent system to handle sovereign debt crises in countries that use the euro, and has threatened to block the other reforms if no deal is reached on treaty alterations.

The EU’s executive Commission has put pressure on German Chancellor Angela Merkel and French President Nicolas Sarkozy to abandon their proposals, unveiled by surprise at talks in the French town of Deauville on Oct. 18.

European Justice Commissioner Viviane Reding has warned that this would mean opening a “Pandora’s box” after taking a decade to negotiate the treaty and called it “irresponsible” – provoking an angry response from Lellouche.

BERLIN (Reuters) – A senior German conservative has rejected talk that Chancellor Angela Merkel could be replaced by her popular defence minister Karl-Theodor zu Guttenberg if she loses a big regional vote next year.

With Merkel’s Christian Democratic Union (CDU) at risk of losing control of industrial Baden-Wuerttemberg state in March for the first time since 1953, some media say Guttenberg is waiting in the wings to replace her — something he denies.

Merkel won a second four-year term last year at the head of a new centre-right coalition, but her personal poll rating has steadily fallen while Guttenberg, from the CDU’s Bavarian sister party the CSU, now consistently tops surveys ranking the country’s most popular politicians.

Volker Kauder, who leads the CDU in the lower house of parliament, told Sueddeutsche Zeitung newspaper in comments published on Monday that politicians from the ruling coalition should concentrate on “governing, not speculating”.

“Mr Guttenberg is a very good minister, but Mrs Merkel is also an excellent chancellor,” said Kauder in a comment widely interpreted as an order to coalition deputies to stay in line.

While the aristocratic 38-year-old minister is a media star often pictured with his glamorous wife, 56-year-old Merkel keeps her private life out of the limelight.

She now faces questions in the coalition about whether she is conservative enough, especially in the context of an intense national debate over immigration.

BERLIN (Reuters) – The knuckle-dusters, truncheons and jackboots in the first case of a new exhibition on “Hitler and the Germans” in Berlin sets the tone for a stark look at how German society embraced the Nazi regime in all its brutality.

While lots of memorabilia is on show, from SS and Gestapo uniforms to a sideboard from Hitler’s office, the exhibition shows how all levels of German society — media, industry, the church, schools — built up the Hitler cult in the 1930s and clung to it through World War Two until defeat was imminent.

Some media have portrayed the show opening on Friday in the German Historical Museum as a taboo-breaking first exhibition on Adolf Hitler himself. But the curators are at pains to stress that their focus is on the society that created the dictator.

“We don’t want to focus on Hitler as a personality,” said Hans-Ulrich Thamer, curator of the exhibition subtitled “Nation and Crime”, at a media preview on Wednesday.

“We want to look at the rise of the regime, how it operated in power and how it fell, and the tremendous destructive potential that National Socialism unleashed,” he said.

The show is housed in a modern annexe behind the museum on Unter den Linden — the boulevard that Hitler stripped of the linden trees that gave it its name — with no advertising, in deference to German law forbidding the display of Nazi symbols.

But inside the viewer is immersed in a world of propaganda ranging from cigarette packets with the swastika, complete with collectible uniform cards, to a handcart for selling the party paper, “Voelkischer Beobachter”.

BERLIN (Reuters) – Chancellor Angela Merkel said on Wednesday Muslims must obey the constitution and not sharia law if they want to live in Germany, which is debating the integration of its 4 million-strong Muslim population.

In the furor following a German central banker’s blunt comments about Muslims failing to integrate, moderate leaders including President Christian Wulff have urged Germans to accept that “Islam also belongs in Germany.”

The debate comes against a backdrop of U.S. and British concerns over the threat of terrorist attacks by militant Islamists living in Germany, with Berlin toning down such fears.

Merkel faces corresponding discussions inside her Christian Democratic Union (CDU) about whether she is conservative enough, and the center-right leader’s latest comments seemed directed at those who think Wulff went too far in appeasing the Muslims.

Wulff, who has a largely ceremonial role, used a speech on Sunday celebrating two decades of German reunification to urge harmonious integration of immigrants who until a decade ago were considered “guest workers” who would eventually return home.

But whereas the media stressed Wulff’s comments about Islam, Merkel — the daughter of a Protestant pastor brought up in East Germany, who leads a predominantly Catholic party — said Wulff had emphasized Germany’s “Christian roots and its Jewish roots.”

German Christian Democrats often cite shared Judeo-Christian values rooted in the early history of Christianity because of sensitivities about the Holocaust, when the Nazis murdered six million Jews during World War Two.

BERLIN (Reuters) – German police and security experts believe radical Muslim communities like a Hamburg mosque linked to the 2001 attacks on the United States have produced up to 100 trained militants who now pose a major security threat.

Reports of eight German militants killed in a suspected U.S. drone attack in Pakistan put a spotlight on a growing number of trained, battle-hardened jihadists from Germany who are back in Europe and could take part in attacks.

While the German government has played down the latest U.S. and British warnings of a heightened risk of terrorist attacks in Europe, dismissing them as “alarmist,” police see a growing threat from militants trained on the Afghan-Pakistan border.

With papers picturing Berlin landmarks named as potential targets, including the Brandenburg Gate and the Fernsehturm (TV tower) that dominates the skyline, the head of the main German police union warned: “We should expect attacks.”

“The number of dangerous Islamists (in Germany) lies at more than 100,” Konrad Freiberg, chairman of the union, told the Passauer Neue Presse newspaper, adding that about 40 had explosives training. “This is very dangerous for us.”

European and American counter-terrorism officials have also said that concerns about a group of about 100 German Islamists who had travelled between Germany and tribal border areas of Pakistan contributed to the latest security alert in Europe.

Security services have long kept an eye on the militant Islamist scene in Germany, especially a mosque in Hamburg which was frequented by Mohammed Atta — the leader of the group that carried out the attacks on the United States on September 11, 2001.

BERLIN, Sept 28 (Reuters) – Angela Merkel’s cabinet approved a long-term energy strategy for Germany on Tuesday, promising that a bitterly opposed decision to prolong nuclear power would only be a bridge to future reliance on renewable energy.

The chancellor’s decision to extend the lifespan of atomic plants by an average 12 years, reversing her predecessor Gerhard Schroeder’s pledge to turn them off by 2021, has sparked a wave of protest which could affect regional elections next year.

The centre-right government’s decision to tax extra profits made by nuclear power generators has also angered the industry.

Ministers made a joint appearance to show unity and present the “Energy Concept” as the best way to ensure Germany’s energy security, growth and competitiveness in coming decades while setting ambitious goals for clean, renewable energy usage.

“If we don’t lead the way, we won’t be able to convince other countries to take responsibility as well,” Merkel told a news conference.

Environment Minister Nobert Roettgen called it “the most demanding, uncompromising energy and environment plan Germany ever had” which would ensure future competitiveness and growth.

Roettgen said the ambitious long-term goal of cutting carbon dioxide emissions by 80-95 percent by 2050, when 60 percent of all energy and 80 percent of electricity must be derived from renewable sources, was backed by financing and monitoring.

BERLIN, Sept 24 (Reuters) – German business sentiment rose unexpectedly in September to its highest since June 2007, though a growth slowdown in Europe’s dominant economy risks piling more pressure on its struggling euro zone peers in coming months.

The Munich-based Ifo think tank’s business climate index, based on a monthly survey of some 7,000 firms, rose for a fourth consecutive month to 106.8 from 106.7 in August, data showed on Friday [ID:nBAE003827].

The surprise uptick helped push the euro to session highs against the dollar and sterling, while European shares pared losses and Bund futures turned negative [ID:nWEA9505].

The mid-range forecast in a Reuters poll of 48 economists had been for a fall in sentiment to 106.2.

“Today’s Ifo defies any double dip concerns for the German economy,” said ING Financial Markets economist Carsten Brzeski.

Ifo economist Klaus Abberger said the survey also showed Germany’s economic rebound was entering a new phase and losing some pace, with exporters somewhat sceptical over developments in the United States and China [ID:BAT005683].

That slowdown will likely fuel concerns in other parts of the euro zone, notably struggling peripheral economies such as Ireland which have been heavily reliant on ‘growth engines’ like Germany to help compensate for their own weak domestic demand, crushed by austerity measures.