Stoiber insists he is not to blame for Kirch collapse

The collapse of the German media giant Kirch provided a new battleground for Germany's election campaign yesterday, with each of the two main candidates for chancellor trying to blame the other for the bankruptcy.

Edmund Stoiber, the conservative opposition challenger to the Chancellor, Gerhard Schröder,, went on the offensive last night, saying he would not take the blame for the collapse of the media empire, run by his good friend Leo Kirch.

Mr Stoiber, personally identified with propping up the company with poorly checked loans of taxpayers' money, is desperate not to lose his image as an economically safe pair of hands ready to rescue the country from Mr Schröder's Social Democrat-Green coalition government.

With only a few months until the September general election, it is not a fight either would have necessarily picked.

The bankruptcy has tarnished Mr Stoiber's previously strong economic record and to some extent his clean personal image, while the threat of thousands of job losses and instability in the media market were not on Mr Schröder's wish list for the summer.

On Monday, Mr Schröder launched a stinging attack on his would-be rival, attacking him as economically incompetent and even stepping on to personal ground by accusing him of abandoning his friends in a crisis.

Kirch's collapse is the biggest post-war German corporate failure, putting nearly 10,000 jobs at risk and leaving billions of euros of debt – much of it owed to the Bavarian taxpayer.

This is where Mr Stoiber's image is unravelling – as the leader of Bavaria he has provided economic help to Kirch by the bucket-load, largely in the form of loans from the Bavarian State Bank, 50 per cent of which is owned and controlled by the Bavarian state. These debts now add up to about €2bn (£1.22bn) and how much of that can be recovered is far from certain.

Yesterday evening Mr Stoiber, who is head of the Bavarian arm of the Christian Democrat Union – the even more conservative Christian Social Union – used his speech as state Minister President to the Bavarian state parliament to try to shrug off the attacks.

In his prepared remarks, seen by The Independent, Mr Stoiber rounded on his critics, saying they were not considering those whose jobs might be at risk and accusing them of seeking to make political gain from the situation.

He then moved on to a barely veiled attack on the federal government and Mr Schröder. "The insolvency of Kirch Media is not just a failure of the management, but also can be traced back to the recession in Germany," his speech notes read. "The number of business failures hit a post-war high in 2001 at 32,400. For this year we have to reckon with a further increase of up to 40,000.

"That is the result of the wrong economic structural framework ... Germany is at the bottom of the scale in Europe in terms of economic growth and work development," the notes said.

Mr Schröder's position was, however, conveniently backed up yesterday by optimistic economic figures, which showed that unemployment had dropped by 8,000 after seasonal adjustments – and by 140,000 in the unadjusted total of 4.156 million.

But Mr Stoiber was also determined to give Mr Kirch the kind of send-off from the media and politics scene in southern Germany that his business stature and position as a friend of the former chancellor Helmut Kohl would seem to demand.

His speech ended with a personal defence of Mr Kirch, who he said had been unfairly attacked by the Social Democrats. "Leo Kirch might have made mistakes," he said. "But he is still one of the biggest business personalities of the post-war era."

Mr Stoiber's efforts were backed up in Berlin by the CDU general secretary, Laurenz Meyer, who said the Chancellor's comments on Monday were an "embarrassing attempt to attack Edmund Stoiber personally belowthe belt".

He added: "It is a dishonest attempt to shirk economic responsibility. But he will not succeed in blaming the results of his miserable economic policy on the Bavarian premier."

However, calls are growing, led by North Rhine Westphalia's Social Democrat premier, Wolfgang Clement, for an inquiry into how so much money was lent to such an ailing company as Kirch.