* Little movement in marathon Merkel talks with the SPD
* Senior SPD members say privately 'grand coalition' on
* Merkel flirtation with Greens could end after Tuesday
By Noah Barkin and Holger Hansen
BERLIN, Oct 15 The Social Democrats (SPD)
bemoaned a lack of concessions from Angela Merkel, while her
conservative allies accused the SPD of trying to dictate policy
despite losing last month's election.
Still, after eight long hours of talks on Monday between the
chancellor and her centre-left rivals, it was not the partisan
posturing that was most telling, but the readiness of both sides
to talk again.
Despite lingering differences over tax hikes and a minimum
wage, as well as opposition among grassroots SPD members to
partnering with Merkel for the second time in a decade, the odds
that Germany will end up with a 'grand coalition' before
Christmas remain high.
On Tuesday, hours after SPD leaders like Andrea Nahles went
out of their way to make clear they could still say no to
Merkel, other senior party members were striking a more
conciliatory tone in private.
"I still believe we'll have a grand coalition," one member
of the SPD's 35-strong executive board told Reuters on condition
Another SPD board member said that as long as exploratory
talks with Merkel did not collapse in acrimony, the party had
little choice but to enter full-blown coalition negotiations
with the chancellor in the weeks ahead.
If the party balked at that, the official said, Merkel would
be forced into a deal with the environmentalist Greens, a move
that could end up relegating the SPD to the opposition benches
for many years.
"Even if some people expected more from the talks on Monday,
the bottom line remains the same -- it would be a huge surprise
if we don't get a grand coalition in the end," said Frank
Decker, a political scientist at Bonn University.
Later on Tuesday, Merkel's conservatives -- her Christian
Democratic Union (CDU) and the Bavarian Christian Social Union
(CSU) -- will follow up the SPD meeting with a second round of
preliminary talks with the Greens.
Ahead of that session, some Greens leaders were sounding
more open to the idea of a coalition with Merkel.
"I'm curious to see how the second round of talks go, and of
course I'm open to possible surprises," said Katrin
Goering-Eckardt, the party's parliamentary leader.
But there are numerous reasons why the pragmatic Merkel
would prefer to work with the SPD.
For one, that combination was tried before in her first term
and was broadly successful.
Together with the SPD, Merkel extended the retirement age
and shielded Germany from the worst of the global financial
crisis by introducing incentives for companies to avert layoffs.
A cash-for-clunkers scheme boosted demand for German cars.
With the Greens, Merkel would be entering unchartered
territory. The parties have been sworn enemies ever since the
environmentalists emerged as a political force in the 1980s.
Even if new moderate Greens leaders such as Goering-Eckardt
-- a protestant from the former East Germany, like Merkel --
chose to overlook that and do a deal with the CDU/CSU, they may
face a rebellion from below.
"The problem with the Greens is the fear among party leaders
of how the grassroots would react," a senior CDU official said
A so-called "Black-Green" coalition would also struggle to
get legislation through the Bundesrat upper house of parliament,
where the SPD is dominant.
That would make it extremely difficult for Merkel to tackle
priority reforms, like overhauling Germany's cumbersome federal
structure and its fragmented educational system.
The policy divide with the SPD also looks to be smaller.
The centre-left party has already signalled it could stop
insisting on tax hikes if Merkel's camp can come up with other
ways to pay for more investment in infrastructure, education and
research, which all the mainstream parties agree is necessary.
The big sticking point is a minimum wage. In the talks on
Monday, the SPD made clear it would not compromise on its demand
for a nationwide wage floor of 8.50 euros per hour.
But even here, the divide between the parties is more about
method than substance. Merkel agrees in principle to the idea of
a wage floor, but wants this to be negotiated sector by sector,
rather than imposed from above.
On a range of other issues, from how to tackle Europe's
economic and financial woes to completing Germany's shift from
nuclear to renewable energy, the differences are minimal.
Still, the path to an eventual grand coalition won't be
smooth. SPD leaders must take care not to appear overly eager
for a deal with Merkel given deep scepticism among the rank and
On Thursday, Merkel and the SPD will talk again. By Friday
it should finally be clear who Merkel wants to govern with. But
only on Sunday, when some 200 senior SPD members come together
to vote on whether to continue coalition talks, will the outcome
be written in stone.