Analysis: Thinking backwards, Merkel hits her stride BERLIN (Reuters) - Angela Merkel has come under fire in Europe for failing to provide leadership in the euro zone crisis, but at home she is now riding a tidal wave of popularity that would make her fellow leaders envious. Merkel always thinks backwards from the next election, a close adviser once said, adjusting policy carefully -- sometimes years in advance -- to put herself in the strongest possible position for eventual victory. For much of 2011 this approach seemed to backfire horribly. The leader of Europe's most powerful economy appeared out of her comfort zone as the euro zone debt crisis deepened and she was sharply criticized at home and abroad for failing to provide clear leadership. Her abrupt decision last spring to ditch support for nuclear power after the Fukushima disaster in Japan was dismissed by many Germans as a cynical ploy to win votes in a regional election her party ended up losing badly. As the year came to an end, Merkel looked damaged. Her coalition partner, the Free Democratic Party (FDP), was in meltdown and her hand-picked choice for the German presidency embroiled in scandal. But less than two months into 2012, the chancellor suddenly has hit her stride and her political positioning of last year is looking more prescient by the day. The closely-watched "Politbarometer" poll for public television station ZDF showed last week that 77 percent of Germans believe she is doing a good job. The 57-year old pastor's daughter from East Germany is once again the most popular politician in Germany, well ahead of her possible challenger in the next federal vote, Social Democrat (SPD) Peer Steinbrueck. Crucially, her strong personal ratings are pulling up those of her party, the Christian Democrats (CDU), whose support has shot up to its highest since August 2009, just before the euro zone crisis began in earnest and Merkel won her second term. Against the odds, Merkel seems to be turning the implosion of the FDP, which has seen its support tumble from 15 to 3 percent nationwide over the past two years, into a positive. Nearly half of the liberal party's backers have migrated to her conservatives, according to some estimates. By shifting on nuclear power and pushing the introduction of a minimum wage - steps that were highly controversial within her own party last year - Merkel has given herself new coalition options for 2013, when Germans go to the polls again. With their main campaign themes co-opted by Merkel, the opposition SPD and Greens are struggling for ways to differentiate themselves and watching nervously as their own poll ratings, which were strong for much of last year, erode. "The almost panicky retreat from nuclear power after Fukushima now looks like a masterly strategic move," said Josef Joffe, editor-publisher of German weekly Die Zeit. She has stolen a bit of thunder from the Greens, and is now blessed with a plethora of potential partners - the FDP if it recovers, the SPD and the Greens. The nuclear about-face is not without risks for Merkel. The SPD and Greens have grown louder in criticizing her government's failure to map out a strategy for filling the gap arising from the shutdown of nuclear plants that generate close to a fourth of the country's electricity needs. Government subsidies for renewable energy are being reined in, meaning higher-polluting gas and coal will be needed to cover the shortfall, tarnishing the "Climate Chancellor " image Merkel cultivated in her first term by sealing deals to curb climate change within the G8 and EU. The euro zone crisis could also come back to haunt her. Greece is a tinderbox with the potential to explode at any moment, setting off a chain reaction in the single currency bloc that many may blame on Merkel. Europe's largest economy has remained largely immune to the crisis so far. Unemployment is at its lowest since reunification in 1990 and GDP growth has topped 3 percent two years running. But the situation is fragile. Germany suffered a mild contraction in the last quarter of 2011, and more turbulence in the currency bloc or unexpected weakness in trading partners like the United States or China, could hit the economy and faith in the chancellor. For now however, Merkel's strategy of holding back aid until countries commit to tough austerity and resisting calls for "big bazooka" steps like jointly issued euro zone bonds favored by the SPD, is seen by many Germans as the right course. Talk of a full-blown euro zone breakup has eased and so has criticism of Merkel's cautious "step-by-step" approach. The ZDF poll showed 69 percent of Germans approve of her handling of the crisis. Last August a survey for ARD, the other public broadcaster, showed three in four Germans had little or no faith in her crisis management. At the time, many Germans thought she had gone too far in supporting peripheral euro zone states like Greece, while others felt she had not done enough. Not too long ago the SPD and Greens were questioning why we were not offering aid quicker. They said the quicker the better," said Hermann Groehe, a senior figure in Merkel's CDU. In the meantime, the EU is now united in the view that Greece must implement its reform promises before we have solidarity. The fact that this is now a common EU position is a victory for German policy and that of the conservatives. There has been very little hand-wringing in Berlin over the backlash against Germany's economic dominance in Europe. Protesters in Greece, which suffered atrocities at the hands of the Nazis during World War Two, have taken to carrying effigies of Merkel wearing swastikas. Instead, the dominant German feeling has been admiration that Merkel is now running the show in Europe. Since December alone, 10 European leaders have passed through the German capital to be politely lectured to by "Angie" on the future shape of the euro zone. French President Nicolas Sarkozy, who publicly criticized Merkel in his early years in office for thinking instead of acting, has now enlisted her to help salvage his own campaign for re-election. Should he lose, as the polls suggest, Merkel's influence in Europe only seems likely to grow further. Since the euro crisis began, she has seen leaders in Italy, Spain, Portugal, Greece, the Netherlands, Ireland and Finland fall. "There is no one else out there," said Jackson Janes, director of the American Institute of Contemporary German Studies in Washington. If you look around Europe you can't find anyone else in a position of real leadership. A lot of things would flow to her if she won a third term. Merkel would rank behind only Helmut Kohl and Konrad Adenauer as the longest-serving post-war chancellors if she wins next year. But victory would not vault her to the same historical heights as the leader who built up West Germany out of the ashes of World War Two, or the man who brought about German reunification and the introduction of the euro. Manfred Guellner, head of the Forsa polling institute, describes Merkel as the "Kuemmerkanzlerin," a leader who looks after things but doesn't take them forward. "Merkel is no visionary, she has done nothing spectacular so far," he said. Janes believes the chancellor could change that if she can deliver on what until now have been rather vague pledges about the need to move towards a form of "political union" in Europe. People close to Merkel say she is already thinking intensively about the long-term evolution of the bloc. Already this year, she has staged two brain-storming sessions -- the first with the leaders of Austria, Portugal and Sweden, the second with those from Denmark, Estonia and the Netherlands -- at a secluded state-owned palace north of Berlin, to sketch EU's future over a 10-year horizon. These small meetings, advisers say, allow for the kind of open discussion that has become impossible in a bloc that now counts 27 members. In a discussion with students in a Berlin museum this month, Merkel gave a glimpse of her thinking. She spoke of a much stronger European Parliament that would act as a second chamber of government alongside the European Council of EU leaders. Increasingly, she said, national competencies will have to be transferred to Brussels. "If she can pull out a third term, then consolidating this vision of a federal Europe is what would give her the footprint she currently lacks," Janes said. Additional reporting by Andreas Rinke; Writing by Noah Barkin; Editing by Paul Taylor/Jeremy Gaunt