Germany's SPD backs coalition talks with Merkel, sets terms


* Majority of core SPD members polled back talks

* SPD says minimum wage of 8.50 euros per hour essential

* Also demands transaction tax, equal pay and pensions

* SPD chairman says aims to form government before Christmas

* Formal coalition talks could start on Wednesday

By Holger Hansen and Alexandra Hudson

BERLIN, Oct 20 (Reuters) - Leaders of Germany's SocialDemocrats (SPD) won a green light from their party to startcoalition talks with Angela Merkel on Sunday, after promising towring concessions from the chancellor on a minimum wage, equalpay and infrastructure investment.

Discussions between Merkel and the centre-left SPD onforming a new government can now begin on Wednesday, a monthafter an election saw her conservatives emerge as the biggestpolitical force but needing a partner to form a majority.

The SPD's willingness to enter talks comes at a price. Theparty listed 10 demands it called "non-negotiable", including aminimum wage of 8.50 euros per hour, equal pay for men andwomen, greater investment in infrastructure and education, and acommon strategy to boost euro zone growth.

"We will negotiate hard so that in the end a workablegovernment emerges. Compromises will be necessary. However theparty considers the following points non-negotiable," the SPDdeclaration said, listing a minimum wage in first place.

Merkel's Christian Democrats (CDU) and their Bavarian alliesthe Christian Social Union (CSU), favour "wage floors" on aregional or sectoral basis, set by employers and unions.

Volker Kauder, head of the CDU's parliamentary group, saidhe was sure they could reach a deal. Finance Minister WolfgangSchaeuble said any new regulation must not threaten jobs.

Germany's leading economic institutes warned on Thursdaythat the introduction of a minimum wage could lead tosignificant job losses in eastern Germany, where a quarter ofworkers earn less than the proposed new amount.

The SPD also demanded equal pensions in the former West andEast Germany, the ability to have dual citizenship, and measuresto make it easier to combine work with family life.


Of the 229 senior SPD members to vote, 196 supported thetalks, 31 objected and 2 abstained.

"We aim to form a government by Christmas. That should beenough time," SPD Chairman Sigmar Gabriel told reporters.

The parties must thrash out policies and a cabinet line-up.The influential post of finance minister, now held by the CDU'sSchaeuble, is one prize. SPD members have refused to saypublicly which posts they want, but media reports say they mayseek at least six portfolios in the 15-member cabinet.

"In a difficult time for Europe we need the best personthere is. Wolfgang Schaeuble is the best finance minister I cansee out there," Kauder said.

German voters, international investors and Berlin's Europeanallies have mostly been expecting a "grand coalition" betweenthe CDU/CSU and SPD, and few expect any partnership deal togreatly alter Merkel's domestic and foreign policy agenda.

No mention is made in the SPD document of tax increases forthe wealthiest, for which the SPD had campaigned duringSeptember's election but which the chancellor has ruled out.

The SPD wants to avoid a rerun of its 2005-2009 coalitionwith Merkel, from which it emerged with its worst electionresult since World War Two. Disgruntled SPD members protestedoutside the party's Berlin headquarters during Sunday's meeting.

A grand coalition would enjoy an overwhelming majority inthe Bundestag, the lower house of parliament, and find it easierto push legislation through the Bundesrat, the upper house wherethe governments of Germany's 16 federal states are represented.

Such a union began to appear all but inevitable afterMerkel's exploratory talks with the environmentalist Greensbroke down last week, strengthening the SPD's hand.

The SPD will seek final approval of any coalition pact in apoll of its some 472,00 grassroots members.

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