German SPD Urges Merkel to Budge on Taxes to Get Coalition Deal

German Chancellor Angela Merkel’s party will have to drop its opposition to tax increases if it wants a coalition with the Social Democrats, said Axel Schaefer, SDP caucus group leader from the party’s regional power base.

Merkel’s Christian Democratic-led bloc, having refused to countenance raising taxes, “has erected barriers that I can’t see being overcome,” Schaefer, who heads the SPD group from North Rhine-Westphalia, said in a telephone interview two days ago. The situation is “extremely difficult,” since tax increases mustn’t be a “taboo,” he said.

Tax policy is emerging as a key sticking point to coalition building as exploratory talks begin between the two main parties in Berlin today. The negotiations begin at 1 p.m. local time and will probably run for three or four hours, with press statements likely at about 5 p.m., according to the CDU.

Volker Kauder, the parliamentary caucus leader of Merkel’s bloc, and Horst Seehofer, the Bavarian prime minister who heads her Christian Social Union ally, have both said that tax increases are a red line that won’t be crossed.

Schaefer, whose region is more skeptical of a so-called grand coalition with Merkel’s bloc than other SPD factions, said her party’s position made a compromise “hard to imagine.” He cited the need to consider tax increases to allow for secure financing for education, pensions and especially for hard-pressed communities.

Twenty-one people are due to attend the negotiations today: seven each from Merkel’s Christian Democratic Union and from the Bavarian CSU, plus seven Social Democrats. Merkel has convened separate exploratory talks with the Greens next week on Oct. 10.

To contact the reporter on this story: Birgit Jennen in Berlin at bjennen1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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