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German parties start coalition talks

BERLIN (Reuters) - Chancellor Angela Merkel’s conservatives began talks with their pro-business allies on Monday to form Germany’s first centre-right government in 11 years and promised to revive the economy and create jobs.

Angela Merkel (R), German Chancellor and leader of the conservative Christian Democratic Union party (CDU) and Horst Seehofer, leader of the Christian Social Union (CSU) attend first round of coalition talks with pro-business Free Democrats (FDP) in Berlin October 5, 2009. REUTERS/Fabrizio Bensch

Merkel’s conservatives and the Free Democrats (FDP), who won enough votes in last week’s election for a coalition, have vowed to cut tax and curb the role of the state but they differ on key details as Germany emerges from its deepest post-war recession.

As well as policy, the conservatives, comprising Merkel’s Christian Democrats (CDU) and the Bavarian Christian Social Union (CSU), will haggle with the FDP over ministry posts.

Meanwhile, the Social Democrats (SPD), the biggest election losers, looked to a new era as the party’s top committees nominated outgoing Environment Minister Sigmar Gabriel to become chairman..

Heading into the coalition talks, Merkel said creating a stable foundation for Europe’s biggest economy would be vital.

“We want to focus on growth, jobs and prosperity of our country,” said Merkel, who became Germany’s first female chancellor in 2005 and came out on top in the September 27 election.

After the end of the first round of talks, senior officials from each party said the atmosphere had been constructive and all sides wanted to complete the talks as soon as possible. The parties have said they aim for a deal in about a month.

However, the only concrete step agreed was to create ten working groups to prepare the ground on individual topics, such as tax. These groups will start work on Tuesday.


The three parties face tough negotiations to overcome their differences on tax and labour market policy.

The conservatives campaigned on a pledge of tax cuts worth 15 billion euros (13.8 billion pounds), while the FDP promised to slash taxes by up to 35 billion euros.

But whoever takes the finance job will have to juggle with delivering tax cuts while reining in the budget deficit.

An internal chancellery document obtained by Reuters showed the new government will need to save over 40 billion euros by 2013 if it sticks to existing plans to reduce net new borrowing.

The Finance Ministry has forecast Germany’s budget deficit could rise to 6 percent of gross domestic product (GDP) next year -- double the European Union’s limit.

The CDU’s Roland Koch is reported to be Merkel’s choice for finance minister but the FDP wants party veteran Hermann Otto Solms, 68, and the CSU is eying the post for its popular Economy Minister Karl-Theodor zu Guttenberg, 37.

The SPD, dogged by deep divisions over policy direction and ties with the far-left Left party, is desperate for a fresh start under Gabriel, widely seen as a pugnacious pragmatist who represents neither the party’s left nor right.

However, the appointment of Andrea Nahles, a prominent left-winger whom the steering committee agreed should be general secretary, is widely seen as a signal the SPD will shift to the left. Party members have to vote on the appointments next month.

Additional reporting by Matthias Sobolewski, Paul Carrel, and Madeline Chambers, Thorsten Severin