Merkel, SPD Go Into Overtime in German Talks on Next Government

(Bloomberg) -- German Chancellor Angela Merkel's talks on renewing her governing alliance with the Social Democrats breached a Sunday deadline as party negotiators seek to clear final hurdles on labor and health care.

With the endgame for a coalition pact under way, Merkel's Christian Democratic-led bloc secured agreements on rent regulations, public housing and broadband expansion. The biggest disputes, over SPD demands for tighter rules on temporary work contracts and overhauling doctors' pay, remained unresolved on Sunday, the target both sides had set to seal an accord.

“We've determined in the top-level meeting that we're confronting issues where the parties are divided,” Lars Klingbeil, the SPD's general secretary, told reporters after more than nine hours of talks. Talks will resume Monday at 10 a.m. in Berlin, he said.

Merkel earlier told reporters that she was going into talks “with good will, but with a certain expectation that difficult hours of negotiation lie ahead.”

More than four months after her Christian Democratic-led bloc won an inconclusive national election, Merkel has remained in power as acting chancellor. Her fourth term hinges on the ability of Social Democratic leaders to sell another stint as junior partner to a restive base that blames the party's last four years in government for its electoral decline.

Members' Ballot

SPD head Martin Schulz said at the start of the day's talks that he ultimately expects a deal, though extra time might be needed to find compromises.

Any coalition pact will be put to a vote by the SPD's more than 440,000 members. While two polls last week suggested that support for Germany's oldest party has declined to a new post-World War II low of 18 percent, an FG Wahlen survey said support for another “grand coalition” with Merkel's bloc is growing among SPD supporters, with 59 percent in favor.

The task is most difficult for Schulz, who was forced to back off an initial vow not to join a coalition with Merkel after her attempt to ally with the Greens and the pro-market Free Democrats collapsed in November.

The Hurdles That Remain to Merkel's Fourth Term: QuickTake Q&A

Merkel's bloc -- her Christian Democratic Union and the Bavarian Christian Social Union -- drafted a preliminary accord last month with the SPD that was greeted by protest by activist factions of the SPD. A party convention on Jan. 21 backed formal coalition talks with a 56 percent majority after demanding concessions on migration, labor and health policy.

After a breakthrough last week on refugee policy, two key SPD demands remain on the table: tighter rules for employers on granting temporary-work contracts and aligning doctors' pay between private and public health care. The CDU and CSU have balked at both.

Negotiators reached agreement Sunday on housing and the digital economy, including as much as 12 billion euros ($15 billion) in federal money to promote broadband expansion.

The parties agreed last week to give themselves two more days if the Sunday deadline passes, seeking to have an agreement before many politicians return to their home districts for Carnival festivities in many predominantly Roman Catholic regions of Germany.

--With assistance from Rainer Buergin

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Tony Czuczka, James Regan

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