German taxpayers are furious at their leader's ill-advised bid to keep Opel on the road, writes DEREK SCALLYin Berlin

FOR FOUR years, Angela Merkel ruled Germany without putting a foot wrong by sticking to her golden rule of politics: never commit until the last moment.

A month before her term ends, however, she has stumbled badly over the rescue of Opel after disregarding that very rule. Growing public displeasure over the endless rescue drama could overshadow her chances on election day, September 27th.

Everything seemed so simple in March. In Detroit, GM was fighting for its life and risked taking with it Germany’s Opel, putting that group’s 25,000 employees out of work. Spotting an opportunity for political gain, Merkel and her Christian Democrat (CDU) allies piled pressure on GM to sell its German subsidiary after 80 years.

When time became too tight for that, the CDU produced another plan to ring-fence Opel from the GM bankruptcy. Under this plan GM would transfer ownership of Opel to an independent trust based in Germany – controlled by GM and Berlin – in exchange for a €1.5 billion state loan to cover Opel’s daily expenses.

The rescue effort was carefully choreographed in two all-night sessions at the Chancellery, allowing politicians to announce a televisual “breakthrough” in the Berlin dawn.

The first crack in Merkel’s strategy came with the revelation that her fresh-faced economic minister Karl-Theodor zu Guttenberg had threatened to resign during the all-night talks because, in his view, Opel’s structural problems were so grave that the company wasn’t worth saving.

Considering that Opel has been struggling for years, his analysis found huge public support but his preference – to let Opel go into controlled bankruptcy – was overruled by Merkel and the government.

Determined to save Opel at all costs, Berlin dismissed a field of bidders from Italy to China and threw its weight behind a consortium headed by Magna, a leading Canadian-Austrian car parts company, and backed by the Russian-controlled Sberbank.

The arguments in favour of Magna were strong: it is a known industry player that, unlike many other bidders, has practical experience of building cars. But as soon as GM Europe managers signed a letter of intent to sell to Magna, securing bridging financing for Opel, they began examining offers from other bidders.

At the same time, GM in Detroit exited bankruptcy proceedings after just 40 days in a much better financial position than before.

When, earlier this week, rumours circulated that GM was considering holding onto Opel after all, patience in Berlin evaporated and panic set in.

With a month to election day and no deal in sight, Merkel realised that she faces the prospect of having to explain to voters why her cash-strapped government is propping up an American-owned company at a reported cost of up to €5 million a day.

On Monday she made one last attempt to push through a deal, saying it was “urgently necessary” for GM to choose its favoured bidder this week. By Wednesday, as it emerged that GM was in no mood to be rushed by Berlin, Merkel changed her tune.

“Content must come before speed,” she said stoically, calling on GM to work through outstanding issues “thoroughly and calmly”.

As the German leader tries to back away from the mess she has helped create, observers say she has shot herself in the foot.

“The Germans committed themselves [to Magna] far too early,” said Fred Irwin, head of the trust managing Opel. He has dismissed as ineffectual Berlin’s lobbying of leading US officials to force GM to sell to Magna.

“The American government made very clear that they aren’t getting involved in this question therefore some of the German efforts are a waste of time.”

Crucially, in an interview with the Tagesspiegel newspaper, Mr Irwin revealed that, while his new foundation is legally charged with deciding on Opel’s future, GM has a veto over any potential sale.

GM can, if it wants, vote to return Opel to full Detroit ownership and pay back the €1.5 billion loan to Berlin.

It’s a dramatic reversal of fortunes that has left the US car company holding all the cards and Merkel, a month before the election, badly in need of a deal.

The media verdict has been devastating, with the influential Süddeutsche Zeitung calling Berlin the “court jester” of the Opel drama.

“The German government has left itself open to blackmail,” it wrote. “With every passing day, the managers in Detroit let the [Berlin] government know just what they think of their plans.”

Merkel’s uncharacteristic intervention in the Opel saga has overshadowed good news on the economic front that could boost her chances before election day.

Earlier this week, the influential Ifo economic institute in Munich said its index of business confidence had risen more strongly than expected in August from 87.4 to 90.5 points. Managers quizzed by the institute said they were more confident than in recent months about their current and future prospects.

Already Germany’s economic wise men are reducing their drastic economic growth forecasts for 2009.

The German Institute for Economic Research (DIW) predicts Europe’s largest economy will shrink by around 5 per cent this year, compared to its 6.4 per cent forecast in January.

And Deutsche Bank, after predicting growth of just 0.4 per cent next year, is now talking of German growth hitting up to 1.4 per cent.

“We are in a phase of stabilisation,” said DIW economist Christian Dreger.

The real irony of the Opel saga is that, as it drags on towards election day, it could ruin Merkel’s chances precisely among the people she was trying to win over: German Opel workers.

For them, the silver lining on the cloud of GM’s collapse was the possibility of finally being liberated from their little-loved Detroit parent company.

With her political intervention, Merkel may have given GM the breather it needed to hold onto Opel after all – subsidised by the German taxpayer.