(Bloomberg) -- Chancellor Angela Merkel and the Social Democratic Party negotiated through the night on a pact for Germany's next government, seeking a breakthrough to end more than four months of political stalemate.
With a partial draft on the table, Merkel and other top officials of her Christian Democratic-led bloc were holed up with SPD leaders in Berlin early Wednesday with no sign of a deal after almost 24 hours of discussions. A final decision isn't expected until a larger group of 91 negotiators reconvenes later in the day, according to a party official involved in the talks.
At about 7 a.m., a party official said the two sides had temporarily left the table for internal discussions. The talks remain stuck on SPD demands to curb the use of temporary work contracts and end health-care advantages for privately insured patients.
Only about 15 core leaders are currently involved in the negotiations, with a broader group on call to sign off on any final deal. That's unlikely to take place before noon. Merkel postponed a planned appearance with Italian Prime Minister Paolo Gentiloni from midday until 6 p.m.
Faced with Germany's longest party deadlock since World War II, Merkel on Tuesday cited turmoil in global markets as a sign that Europe's biggest economy needs a stable government.
“We must not lose sight of the important points, when we look at the turbulent stock market developments of the last few hours,” Merkel said as she began what all sides say is the decisive round of talks. “We live in troubled times.”
With Merkel's fourth term at stake, SPD leaders are holding out for selling points to offer the party's 463,000 members, who have the final vote on any coalition agreement. That increases pressure on Merkel to make concessions so she can win SPD approval for renewing the party alliance that's governed Germany since 2013.
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“All of us will have to make painful compromises,” Merkel said. “I'm willing to do this if we can ensure that the advantages outweigh the disadvantages.”
Germany's benchmark DAX index declined 2.3 percent on Tuesday to its lowest level in almost four months and the Stoxx Europe 600 Index fell the most since June 2016. A topsy-turvy session for the S&P 500 Index ended with a 1.7 percent advance after Monday's 4.1 percent slide.
In a 167-page coalition draft seen by Bloomberg, dated mid-day Monday, negotiators agreed to:
- Defend Europe's fiscal and deficit rules in any projects with France to strengthen the euro area
- Ensure German lawmakers have a say on policies pursued by a future European monetary fund
- Call for a “trusting” relationship with the U.K. after Brexit
- Pledge to decide this year whether to require hardware fixes for diesel vehicles
- Reaffirm that sanctions on Russia should only be scaled back if there's progress on the Minsk accord to resolve the conflict in eastern Ukraine
Merkel, 63, has governed as acting chancellor since her bloc won an inconclusive national election in September. Now, many SPD members are wary of another four-year tie-up, blaming two previous stints as Merkel's junior partner for the party's electoral decline to a post-World War II low.
If the Social Democrats fail to team up with Merkel, she would have to consider governing without a stable parliamentary majority or put Germany on track for another election, which polls suggest would yield a result little different from the September ballot.
--With assistance from Rainer Buergin and Birgit Jennen
To contact the reporters on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net, Arne Delfs in Berlin at adelfs@bloomberg.net.
To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, David Rocks at drocks1@bloomberg.net, Tony Czuczka, James Regan
©2018 Bloomberg L.P.
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