-- Paul Taylor is a Reuters columnist. The opinions expressed are his own --
By Paul Taylor
PARIS, June 1 (Reuters) - "A billion here, a billion there. Pretty soon you're talking real money," the late U.S. Senator Everett Dirksen is reported to have said about endless requests for public funds.
After providing 6 billion euros in bridging finance and state loan guarantees to rescue General Motors' European arm, Opel, the German government faces a flurry of demands for aid from ailing businesses in the run-up to a Sept. 27 election.
With her Social Democratic (SPD) coalition partners sensing a vote-winning issue in saving jobs in the recession, it will be ever harder for conservative Chancellor Angela Merkel to draw a line as polling day approaches. Yet she must do so quickly to halt a subsidy race that will harm healthy firms, distort European competition and fleece taxpayers.
"The state is in danger of exposing itself to blackmail by helping generously in one case," Economics Minister Karl-Theodor zu Guttenberg warned after Merkel overruled his objections and approved the Opel rescue on Saturday. The pro-market Bavarian conservative was stripped of responsibility for Opel and offered to resign, but was told to stay on.
Already, the next plea for state cash is straining Berlin's ruling Grand Coalition. Retailer Arcandor, which owns the Karstadt high-street store chain, says it needs 650 million euros in government guarantees and a 200 million euro loan from state development bank KfW to avoid going bust within weeks.
Foreign Minister Frank-Walter Steinmeier, the SPD candidate for chancellor, says the government has a duty to save Arcandor to protect 50,000 jobs, twice the size of Opel's workforce. His party chairman Franz Muenterfering, linking aid to Opel and Arcandor, proclaimed an elastic doctrine for distributing state cash: "We must try to stabilise firms that are systemically or fundamentally important to the economy." Roll up, roll up!
Arcandor has no shortage of assets to sell to save itself, since it owns 53 percent of Europe's second travel agent, Thomas Cook. Even if it gets the state aid, analysts reckon Karstadt will have to be merged with Metro's Kaufhof chain, which strongly opposes public handouts to its rival.
Other candidates seeking state loans or guarantees include luxury car maker Porsche, which bit off more than it could chew when it tried to swallow Volkswagen; auto component maker Schaeffler, suffering from its leveraged takeover of larger car parts group Continental; chipmaker Infineon; and printing machine maker Heidelberger Druckmaschinen.
Merkel's style is usually to stay aloof from disputes till the last minute, then side with the winning team. But to avoid a string of hold-ups, she needs to side with the taxpayer and healthy businesses against the temptation to aid losers. Otherwise, her economics minister may end up with the only job in Germany that the government is not trying to save. (editing by David Evans)