Well, Merkel would have the great advantage of being alive and would therefore win in a 48 state landslide, narrowly losing Texas and Oklahoma because of the death penalty (and because nothing says limited government like electing a skeleton for President).
Assuming Thatcher comes back from the dead and is fit for fight:
Merkel would be a fairly standard right wing Democrat, while Thatcher would be a pro-choice, but otherwise mainstream establishment Republican = fundis staying home. Should be a decisive Merkel win. Merkel would get all Obama 2012 states + some economically moderate and SoCon states.
Merkel being against the death penalty may be an issue (Thatcher was one of the few European politicians who was pro death penalty). She has also at times been critical at multiculturalism and advocated a society based on Christian values.
Despite her tough law and order stance Thatcher would ironically be the most libertarian of them, while Merkel is a communitarian.
Abortion is more important than death penalty, which is mostly a states matter. I think Appalachia goes to Merkel (better at SoCon/traditional values, despite Thatcher not being bad at it). Missouri and NC flips to Merkel and Indiana may flip as well.
Maybe:
