Merkel Sees Coalition Deadlock Resolved as Party Frets Over Cost

German Chancellor Angela Merkel faced down growing frustration in her party over concessions made in coalition talks with the Social Democrats, saying that she’s confident the two sides will strike an accord within days.

Merkel’s Christian Democrats, their CSU Bavarian sister party and the SPD have entered a “decisive phase” in negotiations on forming her third-term government, Merkel told reporters in Berlin today. The chancellor has set a self-imposed deadline of Nov. 27 to complete a draft coalition pact.

“I’m still convinced that it will work,” Merkel said after meeting with Norwegian Prime Minister Erna Solberg. “Whether we manage to do it, we’ll see in the coming days.”

Negotiators will meet again tomorrow as they struggle to overcome a deadlock on matters including SPD demands for a national minimum wage and a CDU refusal to free up funds that together threaten their goal to have a new government by Christmas. Party officials publicly discussed for the first time yesterday the possibility of new elections as an option if the talks break down.

More than eight weeks after Merkel’s Sept. 22 election victory, there is growing unease on each side over the amount of concessions extracted by the other. Whereas some SPD members used a party convention last weekend to oppose a coalition with Merkel, there are now signs of unrest in the chancellor’s bloc.

“Is Merkel giving way on all CDU positions to secure the Chancellorship?” Bild newspaper said in a headline in today’s edition over an article that said the CDU had bowed to SPD demands in 10 of 12 main policy areas.

SPD Successes

Bild included a commitment to some sort of minimum wage among the concessions made. Others were on quotas for women on company boards, the planned financial transactions tax and rent controls. The CDU has won through on pensions for mothers of children born before 1992 and on its refusal to support euro-area bond issuance, according to Bild.

Regional CDU members in the states of Baden-Wuerttemberg, North Rhine-Westphalia and Rhineland-Palatinate plan to debate whatever accord is reached amid growing unease over concessions being made by Merkel’s bloc, Die Welt newspaper reported.

“At the moment, the CDU is helping the SPD roll back its own Agenda 2010 reforms” that were pushed through by former Chancellor Gerhard Schroeder, Kurt lauk, president of the business wing of Merkel’s party, said in an interview.

One of the top negotiators, CSU General Secretary Alexander Dobrindt, yesterday cited “areas of true dissent” over a minimum wage and said there was a “long way to go, more than one could have expected.”

Deal Breaker

The SPD campaigned on a statutory minimum wage of 8.50 euros ($11.50) an hour throughout Germany, and says it is a precondition for entering into coalition. Merkel’s bloc wants wages to be set by industry and labor.

Andrea Nahles, the SPD’s general secretary, said that while negotiators had agreed on forming a commission to set the wage, differences remained on how to implement it and what kind of exceptions would be in place.

Speaking today, Merkel confirmed that the debate on how to shape the labor market was “among the more difficult issues” in the talks. She declined to speculate on whether a collapse in the talks would trigger new elections or another partner in government.

The SPD has placed a further hurdle in the way of forming a coalition after it pledged to put any draft accord to a vote of its 470,000 members, a process due to take about two weeks.

Merkel’s vanquished SPD challenger, Peer Steinbrueck, also raised concern, saying that approval for any deal by the party’s membership still hung in the balance.

Members’ Ballot

The result of the membership vote “isn’t self-evident,” Steinbrueck told Die Zeit in an interview published today. Using a colloquialism from his native Hamburg, a port city, Steinbrueck said that “the fish hasn’t yet been scaled.”

Tensions arose after SPD leaders were buffeted by internal opposition at their convention in Leipzig, prompting Chairman Sigmar Gabriel to demand that Merkel “deliver” on policy. Horst Seehofer, the CSU chairman and Bavarian premier, signaled that his party won’t shy away from new elections should talks run aground. The CSU is due to hold a convention in Munich that starts on Nov. 22, when Merkel will make a speech to delegates.

Support for Merkel’s CDU/CSU bloc held at 41 percent for a second week in a Forsa poll for Stern magazine and RTL television released today, after taking 41.5 percent in the election. The SPD was at 24 percent, also unchanged on the week, though down from 25.7 percent in September.

“If the SPD wants to improve its chances at the next election in 2017, it must first demonstrate that it can again govern,” Manfred Guellner, the head of Forsa, was cited as saying by Stern. “Right now that can only happen in conjunction with the Union bloc.”

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

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

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