by Guo Xinyu
BERLIN, Oct. 17 (Xinhua) -- Almost one month after Germany's federal election, Chancellor Angela Merkel's conservatives and the Social Democrats (SPD) agreed on Thursday to launch formal talks on forming a "grand coalition" to rule Europe's largest economy for the next four years.
Party leaders of both sides now agreed to recommend the launch of formal coalition talks to their party committees, with full negotiations on new government policies and cabinet posts likely to begin on Wednesday.
Such a coalition is widely supported by German voters and the country's European partners. Despite policy differences, the two parties are expected to come to compromises on focal points including the introduction of a national minimum wage.
The deal was reached almost one month after the Sept. 22 elections when Merkel's conservative bloc proved to be the biggest winner with 41.5 percent of votes, while the largest opposition party the SPD took 25.7 percent of votes.
Without a majority of the parliament seats, Merkel's conservatives have to find a partner to form a coalition. A grand coalition with the center-left SPD as in Merkel's 2005-2009 first term is supported by most Germans, recent polls showed.
SPD Chairman Sigmar Gabriel said after the third and final exploratory talks on Thursday, party leaders unanimously backed entering formal coalition negotiations with Merkel's Christian Democratic Union (CDU) and its Bavarian sister party the Christian Social Union (CSU).
Now he only has to win the backing of some 200 senior SPD members at a meeting on Sunday before the formal launch of coalition negotiations. It took more than two months to finish the same coalition talks between the two parties in 2005.
This year's negotiations may also prove to be time-consuming as the two parties try to hammer out a detailed program of policies and reach agreements on key cabinet posts. Analysts expect that a new government will not emerge until December.
But leaders of the two parties seemed satisfied and confident after their talks on Thursday.
"At the end of the third round of exploratory talks we are convinced that we can find sensible solutions for both sides, and most of all for the country, even on disputed questions," said Gabriel.
Merkel also left the meeting while smiling, and local media cited a CDU spokeswoman as saying that Merkel described the talks with the SPD delegation as "fair and intense."
Even on the particularly conflict-prone topic of introducing a national minimum wage of 8.50 euros (11.65 U.S. dollars) per hour, a key election platform of the SPD, the two sides seemed to be confident on reaching a compromise in formal negotiations.
"We have a joint goal of seeing a sensible minimum wage ruling - I am sure we will find a result but we didn't discuss it today," said Hermann Groehe, CDU secretary general.
Merkel's party opposes national minimum wage but supports minimum wage deals struck by employers and trade unions in different industry sectors and regions. She reiterated her opposition to the national minimum wage on Wednesday on concerns that it would destroy jobs.
Besides the introduction of a national minimum wage, the SPD also wants to raise taxes on incomes above 100,000 euros to 49 percent from 42 percent. However, Merkel said such tax hike plans would risk spoiling the good situation of the country's economy.
On other social issues, the grand coalition between the CDU/CSU and the SPD would see some policy shifts, said Thomas Fischer of the Bertelsmann Foundation.
He told Xinhua in a recent interview that there are a number of issues on the domestic agenda that must be worked on in the next administration, including child care, health care reform, subsidy cuts and energy policy.
A highlight on the foreign trade policy agenda of the next government will be the negotiations on the TTIP (Trans-Atlantic Trade and Investment Partnership), a transatlantic free-trade zone, Fischer pointed out.
Lars P. Feld, director of the Walter Eucken Institute and member of the German Council of Economic Experts, told Xinhua in a recent interview that the transition to renewable energy will continue to be one of the core tasks of the new federal government as it pushes ahead with the so-called Energiewende, or energy revolution, to shift away from nuclear power and toward green energy.
The German government announced shortly after Fukushima to shut down its nuclear capability within 10 years and replace it with renewable energy, ensuring that renewables contribute 80 percent of Germany's energy by 2050, The transition is expected to cost 550 billion euros by 2050.
CONSISTENT EURO POLICIES
On European policies, Fischer noted that the eurozone debt crisis will remain the dominant issue, although Europe has not taken a prominent role in the election campaign that mainly focused on domestic issues.
On handling the eurozone debt crisis, the SPD called for more solidarity measures for indebted eurozone members including Greece. In contrast, Merkel emphasized structural reforms and spending cuts by indebted countries and said it is her responsibility as chancellor to keep the reform pressure on Greece.
The Social Democrats have so far supported Merkel in parliament on all eurozone crisis votes and are expected to push for more measures to boost economic growth and for deeper European integration in the next government.
Feld said that the new government will press ahead with the eurozone policies of austerity and fiscal consolidation.
On solving the eurozone debt crisis, the economist said the most urgent task for the new federal government is the establishment of an EU agency and a resolution fund to deal with failing banks.
EU leaders set themselves the target of reaching agreement on the mechanism by the end of 2013 so that it can be adopted before the end of the current European Parliament term in 2014. However, a prolonged negotiation on government posts after the German election would affect the decision-making in Brussels.
On Greece, Feld said the new German government would not agree on the prospect of an additional Greek haircut as it believes a writedown is not helpful in carrying out structural reforms in the debt-laden country. Merkel has told voters ahead of the election that Greece would not need a debt writedown but left open the option of more aid for Athens.
Feld said the German government will be more inclined to take pro-growth measures to solve Greek debt problems including making use of EU bailout funds to provide loans to sound projects of Greek enterprises. (1 euro = 1.37 U.S. dollars)