Merkel and leftist rivals test ground for coalition

Reuters

* German conservatives meet SPD on Monday, Greens on Tuesday

* Merkel likely to decide this week on coalition partner

* Centre-left digs heels on over minimum legal wage

By Stephen Brown

BERLIN, Oct 14 (Reuters) - Germany's centre-left SocialDemocrats (SPD) dug in their heels on Monday over theintroduction of a minimum wage ahead of a second round ofexploratory talks with Angela Merkel's conservatives on forminga 'grand coalition' government.

The chancellor, who is seeking a partner for her third termafter falling just short of a parliamentary majority in anelection last month, is still trying to decide whether to enterfull-blown negotiations with the SPD or the environmentalistGreens.

The SPD reiterated one red line before talks with theconservatives that were due to start at 4 p.m. (1400 GMT) onMonday: a minimum wage across all sectors of 8.50 euros permonth. The demand could be difficult for Merkel to sell to hersupporters in the business world.

"Clearly labour policy and the minimum wage are very centralissues for the SPD," the SPD's second-in-command Andrea Nahlestold reporters on Monday. "We're talking about a blanket legalminimum wage of 8.50 for east and west."

Conservative leaders say they are willing to compromise onthe minimum wage - also demanded by the Greens - but insist thatminimum wages should vary from sector to sector and be set byunions and employers rather than by politicians.

The SPD came a distant second to the conservatives on Sept.22 but are determined to exact a high price in return forentering the second 'grand coalition' under Merkel in less thana decade.

A compromise seems possible on SPD demands for tax hikes onthe rich, but party leaders will need to wring other concessionsin order to convince sceptical members to partner with Merkelagain. A meeting of 200 SPD officials will decide on Oct. 20whether to keep talking to Merkel.

"CHALLENGE"

Merkel's Christian Democratic Union (CDU) and its Bavariansister party, the Christian Social Union (CSU), emerged as thedominant force from the election but, with 311 of the 631 seatsin the Bundestag (lower house), they lack a majority.

Merkel held preliminary talks last week with the SPD, whohave 193 seats, and the Greens, on 63. Neither seems desperateto join Merkel, whose last partners, the Free Democrats, failedto get into parliament for the first time since 1949.

The prospect of talks lasting months worries Germany'sEuropean partners, who fear a delay to decisions on measures tofight the euro zone crisis, such as a plan for banking union.

German Finance Minister Wolfgang Schaeuble said this weekend Merkel should have a government in place by mid-November, butNahles said this timetable would be "a challenge".

Merkel is keeping alive the option of the Greens despiteresistance from CSU, which mocks the party born from the 1970speacenik movement for its proposal that Germans observe ameat-free "Veggie Day" once a week.

"It is important for me that the CDU and CSU's campaignpromises come into effect," CSU leader Horst Seehofer said in Munich on Monday. "After all, we won the election."

An alliance between conservatives and Greens remains lesslikely though Merkel made it theoretically possible with her decision in 2011 to accelerate Germany's exit from nuclearpower. Such a partnership, tried with mixed results at statelevel, could have trouble pushing legislation through theBundesrat upper house.

But Merkel may need the Greens, with whom talks are plannedfor Tuesday, if the SPD baulks.

In addition to the green light from 200 senior partyofficials next week, SPD leaders have promised all of their472,000 members a vote on a final coalition deal, introducing afurther element of uncertainty into the political outlook forEurope's largest economy.

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