BERLIN Angela Merkel's conservatives and the Social Democrats (SPD) said they had agreed in coalition talks on Monday to push for a financial transaction tax but needed to consult further on the key issue of a European banking union.
The parties started negotiating policy compromises last week with the goal of having a new "grand coalition" government in place by Christmas.
Germany's European partners will be watching the negotiations closely, hoping for a swift deal that allows the bloc to meet looming deadlines for its ambitious banking union.
The parties' working group charged with coming up with compromises on European policies held its first meeting on Monday but achieved clear consensus only on the transaction tax, which both parties had previously championed.
Leading negotiators for both camps said they needed to continue discussing details of a European banking union and how the euro zone should fight its debt crisis.
European Parliament President Martin Schulz, lead negotiator for the SPD on European themes, said they had not discussed euro bonds because it had become clear "that the German constitution does not allow this to be implemented".
During the election campaign, the SPD had called for a lifting of taboos on liability mutualisation within Europe and introduction of a common euro zone debt redemption fund - a strategy the conservatives rejected.
(Reporting by Gernot Heller; Writing by Sarah Marsh; editing by Ralph Boulton)