Chancellor-designate Angela Merkel, chairwoman of the German Christian Democrats, center, and the Governor of the German state of Bavaria, and Chairman of the Christian Social Union Edmund Stoiber, right, leave the Willy-Brandt-House after the first round of the coalition talks between the Social Democratic Party and the Christian Democrats (CDU/CSU) in Berlin, Germany, Monday, Oct. 17, 2005.

BERLIN, Oct. 17 (Xinhuanet) -- Formal negotiations on a grand coalition between Germany's chancellor-designate Angela Merkel's Christian Democratic Union (CDU) and incumbent Chancellor Gerhard Schroeder's Social Democratic Party (SPD) started on Monday.

    "There will be tough negotiations," said Merkel, adding that both parties were very serious about clinching out an agreement.

    Difficult points facing them would be labor market reforms, meant to lower Germany's jobless rate of more than 11 percent.

    The CDU wants to ease the hiring and firing laws to cut labor costs, but the SPD is strongly against such moves.

    The SPD is also opposed to Merkel's calls to raise the sales tax to 18 percent from the current 16 percent.

    Local media saw signs that Merkel has agreed to water down her more radical proposals to boost the economy, such as cutting employers' costs.

    The conservatives have singled out such issues as making a new budget, reforming the labor market, welfare system and tax system to promote economic growth that must be agreed on in the negotiations.

    The first grand coalition government in Germany since the 1960s is expected to be in place till mid-November, as the negotiations on the government's program could take four or more weeks.

Leader of Germany's conservative Christian Democratic Union (CDU) Angela Merkel and the leader of the Christian Social Union (CSU) Edmund Stoiber (R) leave a news conference after first round of coalition talks between CDU/CSU and Social Democratic Party (SPD) at the SPD headquarters in Berlin October 17, 2005. Several leading conservative rivals of German chancellor-designate Angela Merkel were nominated on Monday to join her cabinet in a planned 'grand coalition' government with the Social Democrats (SPD).(Reuters photo)

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