Germany's Merkel to start tricky coalition talks with SPD

BERLIN - Reuters

German Chancellor and leader of the Christian Democratic Union Angela Merkel (C) arrives with senior party leaders at the Parliamentary Society, for preliminary coalition talks between Germany's conservative parties and Social Democrats in Berlin October 4, 2013. REUTERS Photo

German Chancellor Angela Merkel holds preliminary talks with the Social Democrats (SPD) on Friday to sound out the chances of forming a "grand coalition" government, marking the start of complicated horse-trading that could last two months or more.
 
The SPD is considered the most likely coalition partner for Merkel's conservatives but has warned it will not be rushed into a deal. Merkel will also hold preliminary talks with the Greens next week, playing potential partners off against each other.
 
At stake is whether the two mainstream parties can agree on tax measures, a minimum wage and infrastructure investment to rebalance Europe's biggest economy, and form a government with broad enough public backing to tackle the euro zone's banking and debt problems.
 
The SPD will have to drive a hard bargain to make any deal palatable to its members, many of whom oppose another 'grand coalition' because the party slumped to its worst post-war result in 2009 after hooking up with Merkel in her first term.
 
The talks, due to start at 1100 GMT, will examine whether policy compromises are feasible. Party leaders will make statements afterwards, probably in the evening.
 
Their comments will give an early indication of how doable a grand coalition is. While they are not
expected to say anything substantial on policy, they could announce further rounds of exploratory talks.
 
The two parties disagree on key areas such as taxation, wages and investment. While the SPD campaigned for higher taxes on the rich, the conservatives ruled out increasing any taxes, but they could compromise by agreeing to crack down on tax evasion and closing loopholes for big corporations.
 
The social democrats are expected to make introducing a national minimum wage a condition for a coalition. Merkel prefers "wage floors" agreed by region or sector but she may have to accept a blanket minimum to get a deal, perhaps not as high as the 8.50 euros ($11.60) an hour the SPD wants.
 
The two parties may also agree on ramping up public investment in transport, energy and communications networks - an SPD demand - and on curbing costly renewable energy subsidies.