BERLIN (Reuters) - It was the German Social Democrats’ first electoral test under their new leader, Martin Schulz. They failed. Instead, voters in the state of Saarland flocked to Chancellor Angela Merkel’s conservatives on Sunday for fear of a new left-wing alliance.

Social Democratic Party (SPD) leader Martin Schulz and Anke Rehlinger, top candidate in the Saarland state elections, at the SPD headquarters in Berlin, Germany, March 27, 2017. REUTERS/Hannibal Hanschke

“A damper for Schulzomania,” the Sueddeutsche Zeitung daily wrote in a Monday editorial as politicians in Berlin sought to evaluate the implications of the vote for the Sept. 24 national election in Germany, the European Union’s pivotal member state.

Schulz has led a revival in his Social Democrats’ (SPD) poll ratings since winning the nomination as their leader in January. But the prospect of his center-left party ruling with the far-left Linke in Saarland turned off voters there.

Both the SPD and Linke lost support from the 2012 vote after suggesting they could team up or form a “red-red-green” alliance with the environmentalist Greens. In the event, the Greens did not meet the 5 percent threshold to enter the state assembly.

The outcome is a setback for the prospects of such a left-leaning alliance ousting Merkel after September’s vote, though drawing lessons for the federal vote from the Saarland result is problematic and “red-red-green” could yet prevail nationally.

With just 800,000 voters, Saarland is the size of just two of Berlin’s residential districts. Merkel’s conservatives also fielded a strong candidate in Annegret Kramp-Karrenbauer, the state premier who has been nicknamed “the Merkel from the Saar”.

“I know her. She is simply brilliant,” said Hajo Funke, political scientist at Berlin’s Free University, adding that Kramp-Karrenbauer had focused on competent government in Saarland and was not egocentric. “So the ‘Schulz effect’ was curtailed, but it still exists.”

The suggestion of an alliance of the SPD with the far-left Linke unnerves many voters in western Germany. But it is not a taboo in the east, where the Linke, the successor to the old East German Communist Party that rejects NATO and wants to lift the top income tax rate to 75 percent, already governs in a three-way leftist alliance in Berlin and Thuringia.

Schulz played down the implications of Sunday’s result for the national election, saying Saarland was a special case. He pointed to Oskar Lafontaine, a former SPD chairman who deserted the party for the Linke, which he heads in the western state. Years of poisoned relations between the two parties followed.

“I think there are only limited inferences that can be drawn from state elections for the whole country,” Schulz said, appearing to leave open the possibility of cooperation with the Linke at national level.

Two more regional elections in May - in the far northern state of Schleswig-Holstein and the populous western region of North Rhine-Westphalia - offer the Social Democrats the chance to regain the initiative.

Polls show the SPD leading in both states, though they underestimated the strength of Merkel’s Christian Democrats (CDU) in Saarland and overestimated support for the SPD.

STAGE VICTORY FOR MERKEL

Despite the local caveats in Saarland, the message for the SPD is that the “Schulz effect” is not yet gaining enough traction despite a 10-point bounce in the party’s national ratings since his nomination in January.

“It needs to deliver more,” Funke said of the SPD. “A lot depends on whether the SPD can be convincing when fleshing out its election campaign focused on social issues and Europe.”

Schulz is trying to win over dissatisfied working class voters with a message of social justice. Under Merkel, who has been in power for 11 years, Germany has enjoyed economic growth and high employment, but the gap between rich and poor has widened.

Voters feel this sense of growing inequality but are loath to sacrifice the relative economic stability they enjoy under Merkel at a time when much of southern Europe is plagued by mass unemployment and neighboring France is faring less well.

Underlining Germany’s economic strength, a survey released on Monday showed German business morale touched its highest level in nearly six years in March.

“Schulz is speaking about the problems - he has talked about making nurseries and education free - but on economic and social issues, the CDU can say that Germany is doing far better than comparable neighboring countries,” said Funke.

On the long road to the Sept. 24 federal election, Saarland was a stage victory for the Christian Democrats.

“It is one result on a long path,” Merkel told reporters. “We have our feet well enough on the ground to know that all the problems for 2017 are not solved with this.”

At national level, the SPD, Linke and Greens have held exploratory talks about forming a coalition to oust Merkel after September’s vote, and have discussed refraining from attacking each other during the campaign.

Schulz’s challenge is to convince voters he will not be dragged too far to the left.

A Forsa poll released on March 22 showed 59 percent of those asked wanted change in Germany’s top leadership, possibly pointing to an appetite for a different coalition. But only 19 percent were in favor of a “red-red-green” alliance.

“Flirting with red-red does not go down well in this state,” Kramp-Karrenbauer said after the Saarland vote. “That should be a signal for the federal level too.”