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UPDATE 1-Germany’s Scholz to carry on as finance minister despite SPD defeat

* Scholz ready to stay despite biggest political defeat

* SPD party conference could limit his room to manoeuvre (Adds sources, details, background)

By Holger Hansen and Christian Kraemer

BERLIN, Dec 2 (Reuters) – Germany’s Olaf Scholz will carry on for now as finance minister despite losing a bid to lead his Social Democratic Party because he sees it as his duty not to sink the ruling coalition, people familiar with the matter said on Monday.

Scholz and his running mate lost a vote for leadership of the SPD on Saturday to two leftist critics of the party’s coalition with Chancellor Angela Merkel’s conservatives, putting Europe’s largest economy at a political crossroads.

The vote is the biggest defeat in Scholz’s political career and marks the end of his dream to become the SPD’s candidate to succeed Merkel as chancellor after the 2021 election.

Scholz is however ready to carry on in his current role, a senior government official told Reuters, adding that Scholz would represent Germany at a regular meeting of euro zone finance ministers on Wednesday in Brussels.

Scholz, who is also vice chancellor, will return to Berlin for a meeting of senior SPD members on Thursday to prepare for a crucial party conference starting on Friday, the official added.

The conference will decide on the future of Merkel’s coalition. Should delegates vote in favour of staying in power with Merkel’s conservatives, they could still limit Scholz’s room for manoeuvre.

If delegates back a petition calling for an end to the “black zero” budget policy of not incurring new debt, Scholz could be forced to reconsider his decision to stay as he is against new borrowing in times of growth.

Possible SPD candidates to succeed Scholz include his fiscally conservative deputy Bettina Hagedorn and centrist budget expert Carsten Schneider, party sources said. (Reporting by Holger Hansen and Christian Kraemer Writing by Michael Nienaber Editing by Paul Carrel and Giles Elgood)

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