By Paul Carrel and Holger Hansen
BIELEFELD/BERLIN, Germany (Reuters) - His only experience of governing in Germany is as a town mayor. She is Europe's most powerful leader. Yet Martin Schulz wants to end Angela Merkel's 11-year run as chancellor and fundamentally shift Germany's role in Europe. He might just pull it off.
Schulz has revitalized his Social Democrats' (SPD) fortunes since they nominated him last month to challenge Merkel in a Sept. 24 federal election, narrowing a popularity gap with her conservatives and even overtaking them in one opinion poll.
Who is he? One year Merkel's junior at 61, Schulz is the former president of the European Parliament. While she has a doctorate in physics, he left school without his final exams before working his way up through local politics and on to Brussels. He brings oratory and a common touch she cannot match.
What is more, he offers change: an end to Germany's role as enforcer of the austerity that has fed deep resentment across southern Europe, and an increase in government investment at home with less obsessing about fiscal discipline.
With no executive experience, Schulz faces a formidable task in taking on Merkel, Europe's anchor of stability who won the endorsement of former U.S. president Barack Obama on a farewell to Berlin visit last November.
Schulz is certainly up for the fight.
"I want there to be fairness in our country!" he roared to thundering applause from several hundred supporters at an SPD meeting on Monday in Bielefeld in northwestern Germany, one of the many towns he is visiting to re-energize the party's base.
In a 65-minute speech, Schulz took aim at job insecurity and old-age poverty, promising to defend pensions, reduce temporary work contracts and revise some of the 'Agenda 2010' labor reforms enacted by the last SPD-led government.
"When we have billions in budget surpluses in this country, I don't want this money used for tax relief on big incomes but rather for it to be invested," Schulz said, demanding more investment in education, infrastructure and digital technology.
By prioritizing investment, Schulz contrasts with Merkel's finance minister, Wolfgang Schaeuble, who is resolute in his pursuit of a balanced budget and who wants to use surpluses to pay off debts now and cut taxes after the election.
The SPD would not go so far as to ditch the so-called debt brake that allows the federal government to take on new debt only up to the equivalent of 0.35 percent of gross domestic product (GDP) each year.
"That is not up for debate. Nobody is talking about that," Ralf Stegner, a Schulz ally and deputy SPD leader, told Reuters.
But a Schulz-led government would take a more accommodative approach to euro zone peers trying to reform their economies than that championed by Schaeuble, who has raised the prospect of a Greek exit from the bloc.
"DIFFERENT ATTITUDE" ON GREECE
Under Merkel, Germany has led demands for austerity in Greece in return for aid.
Her government wants Athens to reach a primary budget surplus, excluding debt repayments, of 3.5 percent of GDP, and keep it there. Berlin argues that if Athens can hit that target, no debt relief will be necessary.
The SPD is ready to ease the austerity Greece must swallow.
"The Greeks have had to make huge reforms, putting a heavy strain on ordinary people," Stegner said, noting Athens had achieved surpluses. "Yet these are not big enough for Schaeuble. There is a completely different attitude on this in the SPD."
"If there is an SPD-led government, there will be a change of course on this point," Stegner said. "We want growth and employment in Europe."
SPD lawmaker Achim Post, who has known Schulz since 1994, worked with him in Brussels, and now sits on the Bundestag's foreign affairs committee, underlined the point:
"More must be done for growth and employment," he said. "If I push Greece further under water, or Portugal too, how should growth be generated if I cut wages and pensions?"
Post, who was at Schulz's side at the Bielefeld meeting, said his old friend is determined to win the election.
"He doesn't just want to stand as a candidate, he wants to be chancellor," Post told Reuters.
"MAN OF THE STREETS"
With his focus on fighting inequality, Schulz is trying to sharpen the SPD's policy edge, blunted by spending seven of the last 11 years sharing power as junior coalition partners with Merkel's conservatives. That arrangement turned voters off the two big parties and fed the rise of the far-right Alternative for Germany (AfD).
As a new face in German national politics, Schulz is untarnished by the compromises his party made in Merkel's 'grand coalition'. His push for social justice is resonating with voters, 10 million of whom the SPD lost in a decade.
"He is authentic. He speaks the language of the streets," said Johannes Kemper, 56, an engineer who traveled 120 kilometers (75 miles) to listen to Schulz speak in Bielefeld. "He speaks to the worries there are on the streets."
Germany has enjoyed solid growth since Merkel took office in November 2005, and unemployment has fallen to record lows. Yet many people earn low wages and feel left behind in a globalized economy that has seen the gap grow between rich and poor.
"If the small baker in Hamburg pays his taxes but the American coffee business next door pays no taxes ... if big businesses make more profits for years but real wages in Germany stagnate or fall, that is not fair," Schulz said at a town-hall style meeting in Ahrensburg, near Hamburg, earlier this month.
Conservatives have made clear they will attack Schulz's record in Brussels.
As European Parliament president, he found himself embroiled in late 2014 in a controversy over how strenuously the parliament would investigate tax deals in Luxembourg during European Commission chief Jean-Claude Juncker's 18-year tenure as the small country's premier. The deals included favorable arrangements for Amazon and Fiat.
While close to 200 parliament members sought the creation of a committee of inquiry to investigate, Schulz steered the legislative body towards looking into the matter via a less powerful special committee.
Opponents said this meant he helped Juncker get an easier ride. The Commission says Juncker is always ready to cooperate with the European Parliament and has nothing to hide. A spokesman for Schulz said he did not block an investigative committee and would not have had the power to do so.
Members of Merkel's conservatives have compiled a dossier on Schulz, raking over his Brussels record. The document, which Reuters has seen, shows other likely lines of attack.
They accuse him of failing to adequately separate his dual roles as the politically neutral head of the parliament and as the Social Democrats' lead candidate in the 2014 European elections. Schulz's spokesman responded saying his conduct in the European election campaign "was examined extensively by the European Parliament. There were no complaints."
On policy, the conservatives attack him for advocating the pooling of euro countries' debts with so-called "euro bonds" and for supporting Turkey's accession to the European Union - two policies unpopular in Germany.
"Once the hype is over and people try to figure out what he actually stands for - then you can get him," said one senior conservative politician close to Merkel, speaking on condition of anonymity while explaining the conservative plans for attack.
Unperturbed, Schulz and his team are plotting their path to power. The SPD has held several rounds of exploratory talks with the Greens and the far-left Linke party about forming a left-leaning coalition government.
The three parties have discussed refraining from attacking each other during the campaign. The smaller parties want to profit from the Schulz stardust.
"With Martin Schulz, the SPD has a real candidate for chancellor," said Dietmar Bartsch, who heads the Linke party group in parliament. "A change of government is possible."
(Additional reporting by Tom Koerkemeier in Brussels and Madeline Chambers in Berlin; editing by Peter Graff)