German parties in policy deadlock

BERLIN Mon Nov 5, 2007 6:12am EST

German Chancellor Angela Merkel at the Bundestag in Berlin, October 26, 2007. REUTERS/Hannibal Hanschke

German Chancellor Angela Merkel at the Bundestag in Berlin, October 26, 2007.

Credit: Reuters/Hannibal Hanschke

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BERLIN (Reuters) - Germany's ruling coalition of conservatives and Social Democrats failed on Monday to resolve disputes over a range of policies and will meet again in a week's time.

The talks were widely regarded as a test of conservative Chancellor Angela Merkel's resolve to resist a shift to the left by her Social Democrat (SPD) partners.

Leading party figures said they would revisit on November 12 issues including extending jobless benefit payments to older people, a minimum wage, the part-privatization of state rail operator Deutsche Bahn and childcare benefits.

The only agreement reached by the two parties was to make no move towards reinstating commuter tax breaks for the time being.

"We talked to each other in a business-like way," SPD leader Kurt Beck told reporters after four hours of talks that began on Sunday evening. "We made progress in all areas, we will continue to work sensibly with each other."

Miserable opinion poll scores, looming state elections and the challenge of left-wing party Die Linke prompted Beck to chart a new left-leaning course that fuelled tension in the coalition.

Merkel made clear she would not reverse economic reforms and said cutting unemployment, supporting economic growth and maintaining solid public finances were her priorities.

"I am not prepared to undertake policies which put at risk our policies of consolidation and of making more jobs," she told German television.

A rolling-back of reforms in Europe's biggest economy, credited with supporting economic growth and boosting employment, could lead to a reversal of gains in competitiveness in the run-up to elections in 2009, analysts say.

HURLING INSULTS

The opposition Greens attacked both parties for agreeing to do nothing after a week of hurling insults at each other.

"Good governance ... looks very different to what the coalition is showing in terms of policy denial and ineptitude," said Greens leader Claudia Roth.

One of the thorniest issues is the introduction of a minimum wage to the postal sector which is due to take place alongside liberalization of the sector on January 1, 2008.

SPD parliamentary leader Peter Struck indicated agreement on the issue may come soon.

"The conservatives have dropped their position that this can't be done," he told German public broadcaster ZDF.

However, Merkel said further talks were needed before any deal was reached. The CDU opposes applying the wages of Deutsche Post employees to the whole sector.

The latest opinion polls put the conservatives on around 40 percent with the SPD trailing by as much as 14 percentage points and Die Linke on around 10 percent.

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