Merkel, SPD agree on transaction tax in coalition talks


BERLIN, Oct 28 (Reuters) - Angela Merkel's conservatives andthe Social Democrats (SPD) said they had agreed in coalitiontalks on Monday to push for a financial transaction tax butneeded to consult further on the key issue of a European bankingunion.

The parties started negotiating policy compromises last weekwith the goal of having a new "grand coalition" government inplace by Christmas.

Germany's European partners will be watching thenegotiations closely, hoping for a swift deal that allows thebloc to meet looming deadlines for its ambitious banking union.

The parties' working group charged with coming up withcompromises on European policies held its first meeting onMonday but achieved clear consensus only on the transaction tax,which both parties had previously championed.

Leading negotiators for both camps said they needed tocontinue discussing details of a European banking union and howthe euro zone should fight its debt crisis.

European Parliament President Martin Schulz, lead negotiatorfor the SPD on European themes, said they had not discussed eurobonds because it had become clear "that the German constitutiondoes not allow this to be implemented".

During the election campaign, the SPD had called for alifting of taboos on liability mutualisation within Europe andintroduction of a common euro zone debt redemption fund - astrategy the conservatives rejected.

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