COTTBUS, Germany (Reuters) - Few politicians in Germany have quite as much momentum these days as Oskar Lafontaine and the populist leader of the rising Left party is making the most of it.
At a weekend congress in the eastern city of Cottbus, Lafontaine whipped up Left party delegates with attacks on market capitalism and basked in the glow of media reports that have dubbed him Germany's "secret chancellor."
"We are being hailed as the most successful new party in decades and they say we are setting the political agenda in Germany," a beaming Lafontaine told some 600 "Linke" supporters gathered for the party's first national convention.
The Left and Lafontaine, a 64-year-old former chairman of the Social Democrats (SPD) who had a short, turbulent stint as German finance minister in the late 1990s, are on a roll.
Formed last year when a group of Lafontaine-led SPD defectors based in western Germany merged with the ex-communist Party of Democratic Socialism (PDS), the new party has thrown German politics into disarray and its big parties, particularly the centre-left SPD, on the defensive.
The Left has profited from the bickering and policy gridlock that has characterized Chancellor Angela Merkel's "grand coalition," and attracted thousands of Germans who feel the economic recovery of the past two years has passed them by.
Earlier this year, they entered the parliaments of three western states within the span of a month, proving their appeal goes beyond the have-nots in Germany's former communist east.
Now they are being credited with sparking the SPD and Merkel's left-right coalition into action on issues ranging from the minimum wage to unemployment benefits and lawmaker salaries.
"Lafontaine is the one shaping the debate on social issues in Germany right now," said Wolfgang Nowak, head of the Alfred Herrhausen Society, a Deutsche Bank think tank. "He is effectively defining policy for the SPD."
With support of 12 to 15 percent in national polls, the Left has emerged as Germany's third largest party, behind Merkel's Christian Democrats (CDU) and the struggling SPD. The next federal election will be in 2009.
Throw in the Greens and the liberal Free Democrats (FDP) and Germany now has five sizeable parties -- a fractured political landscape that has complicated coalition building at both the state and federal levels. Against this backdrop, Lafontaine and his party have emerged as influential power brokers.
But with the success has come increased scrutiny of the party, its leaders and their politics.
In the west, the Left has struggled to come up with qualified members to represent it in state parliaments -- a problem highlighted in February when it was forced to dismiss a regional deputy who voiced support for a return of the Stasi, East Germany's feared secret police.
In the run-up to the Cottbus convention, the Left had to force another of its members, Sahra Wagenknecht, to drop her candidacy for deputy party leader because of her role in the Communist Platform, an organization that advocates the overthrow of capitalism and is monitored by German intelligence.
Gregor Gysi, parliamentary leader of the Left and the party's most prominent politician next to Lafontaine, has also faced difficult questions.
Last week, archives made public suggested he may have informed for the Stasi when he was a lawyer in the "DDR." Gysi has called the accusations "malicious" and "false."
Talk to party delegates from the east and they warn against a "westernization" of their party. Some westerners view their eastern comrades with suspicion because of their links to East Germany's ruling SED party.
The leadership did its best to paper over these troubles in Cottbus, a struggling city 125 km (80 miles) southeast of Berlin where support for the Left is high.
In its party program it advocated a 50-billion euro growth program it said would create 1 million jobs, a nationwide minimum wage of 10 euros an hour, a ban on layoffs at profitable firms and rises in property, corporate and inheritance taxes.
Appealing to the party's strong pacifist wing, Lafontaine railed against NATO, calling it a U.S.-led military machine that violates human rights around the world.
In a nod to recent turbulence in financial markets, he unveiled a 12-point action plan to counter what he called the "perversity" of market-driven capitalism, including a ban on hedge funds and stock options.
"We are having a huge influence," said Kathrin Vogler, a 44- year-old delegate from North Rhine-Westphalia who was an SPD member for 18 years before bolting for the Left. "We raise these issues and the coalition in Berlin shakes."
When asked to spell out the party's long-term goals and ambitions, however, delegates were stumped.
SPD chief Kurt Beck has opened the door to loose cooperation with the Left in western states in the hopes of unseating Merkel's conservatives.
But many of the Left's 73,500 members have trouble imagining their party as anything but an opposition force and oppose compromising with the SPD at the state or federal level even if it would secure them a role in government.
"If we compromise and let the other parties influence our policies we might as well give up now," said Hans Juergen Gaertner, a 46-year old delegate and protestant pastor from Lafontaine's home state of Saarland.
Writing by Noah Barkin; Editing by Matthew Jones