FACTBOX: Policy differences on German center-right

(Reuters) - German voters gave conservative Chancellor Angela Merkel a second term Sunday and allowed her to dump her center-left coalition partners in favor of the pro-business Free Democrats (FDP), projections showed.

There are key policy differences, however, between her Christian Democrats (CDU), their Bavarian sister party, the Christian Social Union (CSU), and the FDP, which will need to be hammered out as they strike a coalition agreement.

ECONOMY/FINANCE

The FDP would not oppose tighter financial regulation, but if in doubt is more likely to stall any new measures rather than support them. It would like to see the state withdraw from the troubled banking sector as soon as possible.

The FDP would like to cut taxes by up to 35 billion euros ($51.4 billion) -- a much higher target than the CDU. But given Germany's budget deficit, it has little chance of achieving this. The CSU has rejected any cuts to social security in order to fund tax cuts.

JUSTICE/SECURITY

The FDP is strongly opposed to CDU/CSU plans to deploy the German army in a domestic security role in support of the police. The FDP has rejected a number of security measures taken by the grand coalition of Merkel's conservatives and the center-left Social Democrats (SPD) in the last four years, even taking its complaints as far as Germany's highest court. The FDP is strongly against keeping records of individuals' private computer activity.

EMPLOYMENT/HEALTH

Merkel has already ruled out the FDP's plans to make it easier to fire employees. The FDP would also like to replace the Federal Labor Office with a three-tiered model of regional job centers, benefit offices and a central employment agency.

The FDP would like to completely overhaul statutory health care, introducing flat-rate health insurance contributions in place of insurance payments based on income.

FOREIGN POLICY/Defense

The parties hold contrasting views on Turkey's accession to the European Union. The CDU opposes Turkey joining the bloc. The FDP says it is not against it, but that Turkey has not yet met the requirements for membership.

The CDU/CSU wants military service to continue, while the FDP would like to see a fully professional army.

On disarmament, the FDP wants to see the removal of remaining U.S. nuclear weapons in Germany.

(Compiled by Sabine Siebold, Andreas Moeser; Writing by Alexandra Hudson; Editing by Mark Trevelyan)