The newly re-elected chairman of Germany's Social Democrats suffered an embarrassing defeat on Saturday when the party's left wing moved to stymie plans to privatise German railways.
Delegates at a party congress demanded Kurt Beck accept a potentially lethal condition to the government's support for the privatisation of Deutsche Bahn, which aims to raise 3 billion euros ($4.31 billion) in an initial public offering next year.
Beck had been hoping to put behind him the party's two-year long slump in opinion polls and a divisive row about economic reforms after being re-elected party leader on Friday by a thumping 95.5 percent of the vote from 525 delegates.
Galvanised by the strong vote, Beck and his allies expressed confidence the left would fall into line and not try to thwart a resolution endorsing the partial privatisation of Deutsche Bahn.
But left-wing opponents of the government's proposed sale of 25 percent of Bahn shares managed to include the condition - "otherwise the SPD rejects the sale of shares" - if the SPD cannot agree with Chancellor Angela Merkel's Christian Democrats to sell shares to small investors.
The SPD are in power with Merkel's CDU in a grand coalition. The SPD privatisation opponents fear that SPD ministers would settle on an unacceptable compromise with the CDU to sell the stake to institutional investors rather than small investors.
"We need a strong Deutsche Bahn AG," Transport Minister Wolfgang Tiefensee told the delegates, unsuccessfully urging them to accept the SPD's planned endorsement without conditions. Merkel's cabinet endorsed the privatisation but it still must be approved by parliament, where SPD support is needed.
Tiefensee promised to ensure controls that would prevent hedge funds - sometimes derided as "locusts" in Germany - from breaking up Deutsche Bahn, Germany's largest company. "We will keep the trains in our hands," Tiefensee said. "We'll keep the 'locusts' away.
"We want to prevent institutional investors from having influence on strategic decisions. We all want a strong Bahn. We're actually all on the same side." The condition allowing the SPD to back privatisation only if the shares are widely held has almost no chance of winning approval by Merkel's CDU, which backs Deutsche Bahn management plans to place the 25 percent with institutional investors.
Proponents of the privatisation fear the IPO would not raise as much capital and it could effectively doom the project. "The Bahn belongs on the track and not on the bourse," SPD delegate Michael Conradi said.
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