By Thomas Escritt
BERLIN (Reuters) - Angela Merkel's German coalition deal with the Social Democrats (SPD) was greeted with more scepticism than joy on Thursday, as some said the loveless alliance, born of desperation, showed the conservative chancellor's time was coming to an end.
The deal, reached in record time to end months of political paralysis after Merkel had failed to form a coalition with two smaller parties, faces its first test when the SPD's membership vote from Feb. 20 on whether to ratify a deal many never wanted.
But Merkel's camp was also forced to defend a deal that sees the conservatives cede the crucial finance minister post in exchange for a fourth term in office for the woman who has dominated European politics for the past 12 years.
Christian von Stetten, a lawmaker from Merkel's own Christian Democrats (CDU), said the allocation of cabinet posts, notably the finance ministry, had been "a political mistake".
Both camps had to make sacrifices to secure a deal. The agreement promises an unusual half-time review after two years - already being seen as a possible opportunity for Merkel finally to step down.
"If it happens, the fourth Merkel cabinet will in some respects resemble the last cabinets of Helmut Kohl and Helmut Schmidt," wrote Kurt Kister, editor of the Sueddeutsche Zeitung newspaper. "This government could be captioned 'Won't last long'."
SPD MEMBERS' VOTE
Even that may prove optimistic if SPD leader Martin Schulz fails to persuade his party's 464,000 members to ratify the deal in a postal ballot, whose result will be announced on March 4.
Financial markets are watching closely, keen to see a stable government in Europe's largest economy. Reflecting the continuing uncertainty, Germany's 10-year government bond yield hit 0.777 percent, the highest since September 2015.
A survey of 5,127 voters conducted by pollster Civey on Wednesday for t-online indicated that almost 60 percent of SPD supporters want the party's members to back the coalition deal.
But the same poll found that a clear majority of Germans overall wanted party members to reject it.
The center-left SPD saw its previous four years in "grand coalition" rewarded with its worst result in decades in September's national election, and the slide has continued.
The SPD registered 18 percent in a GMS poll conducted before the deal was announced, the lowest reading GMS had ever recorded, and only four points ahead of the far-right Alternative for Germany (AfD). Together, the two grand coalition parties, which have between them shaped Germany's postwar politics, barely scored 50 percent.
Opponents of the deal say Schulz's team failed to put a left-wing stamp on the program, which continues to promise the budget discipline that has been the hallmark of Merkel's three governments. It is unclear if they will be persuaded by his response that the SPD will control top ministries including finance, foreign affairs and labor.
"CHANCELLOR AT ANY PRICE"
Schulz's defenders emphasize commitments on welfare spending, housing and pensions, and worker-friendly labor law reforms.
An SPD source said lawmakers had read out emails from SPD supporters at a party meeting on Wednesday, with some emails saying they had not backed Schulz as party chair only for him to switch to the foreign ministry, as he plans to do. There was unanimous approval for the coalition contract though, the source said.
Paradoxically, the political right's dismay could win over more reluctant SPD members. The mass-selling daily Bild said Merkel had sold out. "Chancellor at any price," Bild wrote on its front page. "Merkel gifts the SPD the government."
But the ill temper in Germany was not matched in other capitals, where news of a prospective end to four months of uncertainty was greeted with relief.
French Finance Minister Bruno Le Maire said the coalition agreement opened the way for convergence with France on reform of the euro zone, something that the SPD had championed.
The European Union leaders' chairman, Donald Tusk, also welcomed the deal, which contains commitments to contribute more to the EU budget, develop the euro zone's bailout fund into a full-blown European Monetary Fund, and support the use of budgetary means to shield the euro zone from crises.
"Now it is high time to build an inclusive pan-European Grand Coalition for an ambitious budget, wise agreement on migration and a better Eurozone," Tusk tweeted.
(Reporting by Andreas Rinke, Gernot Heller, Hans-Edzard Busemann, Leigh Thomas, Yann Le Guernigou and Michelle Martin; Writing by Thomas Escritt and Paul Carrel; Editing by Kevin Liffey)