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Angela Merkel's government suffered a humiliating defeat to the opposition Social Democrats and Greens in key city state elections in Berlin last night as divisions within her coalition over the Greek debt and the future of the euro deepened further.
The Merkel government faces its next major test in just under two weeks when, as part of its plans to rescue Greece, parliaments meet to ratify boosting the lending capacity of the European Financial Stability Facility (EFSF) from €250bn to €440bn. With opposition increasing from within her own ranks, Ms Merkel cannot be certain of a majority.
The Chancellor has indicated that she may have no option but to rely on the votes of opposition Social Democrats and Greens to get the measure through parliament. Observers predict that, if she takes this course, she will be forced to hold a parliamentary vote of confidence in her government, which would almost certainly result in the end of her administration.
Mr Gabriel, the SPD leader, indicated yesterday that, if this were the outcome, his party would be prepared to allow Ms Merkel to continue as head of a minority government for an interim period to enable it to save the single currency.