UPDATE 1-Merkel, SPD agree to renew German push for transaction tax
* Main parties hold 2nd round of high-level coalition talks
* Deal on financial transaction levy advances negotiations
* Next German government would push tax at EU summit
By Stephen Brown and Andreas Rinke
BERLIN, Oct 30 (Reuters) - Germany's next government will renew a push for a financial transactions tax, Chancellor Angela Merkel's conservatives and the Social Democrats (SPD) agreed at a second round of coalition talks on Wednesday.
With Merkel's outgoing centre-right government and the SPD having broadly agreed on EU policy during the euro zone crisis, the transactions tax provided an early opportunity to inject some momentum into their tricky coalition talks.
Germany's two main political forces began formal post-election talks last week aimed at clinching a new "grand coalition" government by Christmas, after 16 working groups forge compromises on a wide range of issues including Europe.
"We agreed to push ahead with the financial transactions tax," SPD negotiator Martin Schulz, president of the European Parliament, said after a meeting of the main group of 77 negotiators from Merkel's Christian Democrats, their Bavarian Christian Social Union allies and the SPD.
Plans for 11 European Union states to tax banks about 35 billion euros a year - partly in return for getting assistance from taxpayers during the financial crisis - face stiff opposition from other EU states, especially Britain.
But Germany, one of the main backers of the so-called "FTT", remains determined to introduce the measure swiftly.
"We believe that with the strength of the 'grand coalition' we can bring this process to a conclusion. "When a government is formed and gets to work in the coming weeks, it will launch this initiative at the next European summit," said Schulz.
"What's new is that three big parties in a grand coalition are going to put this on the agenda and give it a push," said Herbert Reul, the CDU's lead negotiator on Europe.
WARNING FROM EU LAWYERS
EU lawyers say the plan is illegal because it exceeds member states' jurisdiction for taxation, could damage non-participating EU countries and would be an obstacle to the free movement of capital and services in the single market.
Banks have lobbied furiously against the plan, which could be scaled back by lowering the standard tax rate on transactions from 0.1 percent in the original blueprint drafted by Brussels and by introducing it more gradually.
In Brussels, the press office of European Commissioner Algirdas Semeta, who is in charge of tax policy, said the EU's executive body was "ready to support negotiations in every way it can to facilitate an ambitious agreement on the FTT".
"The 11 member states now need to give the political push needed to converge on what they finally want to implement, with the shortest possible delay," the office said in a statement.
German coalition talks have not tackled the SPD's earlier demands for common euro zone bond issuance, to which Merkel is sharply opposed. The SPD dropped it from its platform for the September election because of legal difficulties in Germany.
The centre-right and centre-left cannot agree either on SPD proposals for a debt redemption fund to help reduce borrowing costs for struggling euro zone states like Greece, which Merkel also believes would risk unfairly burdening German taxpayers.
Merkel romped to victory in the Sept. 22 election but the conservatives' longtime Free Democratic partner failed to gain enough votes to return to parliament, forcing them to turn to the SPD to establish a new coalition majority.
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