Coalition talks drag on into third extra day

Coalition talks between Germanys centre-left and conservative parties dragged on into Wednesday morning after Chancellor Angela Merkel negotiated through the night to break four months of paralysis in Berlin.

Merkel and Social Democratic Party (SPD) leader Martin Schulz had sat down Tuesday morning for what was supposed to be the final day of haggling over details in a process begun in early January.

But the finish could be in sight Wednesday, as senior members of Merkel's Christian Democratic Union (CDU) are set to huddle around midday to rake over the results.

At the same time, Merkel has a lunch appointment with Italian Prime Minister Paolo Gentiloni.

"Difficult compromises" would be necessary to clear the roadblocks that have left Germany lame since inconclusive elections in late September, Merkel said as she arrived Tuesday.

Some 20 hours of negotiations have so far not been enough to reach a breakthrough. An initial deadline of Sunday was extended into Tuesday.

If the present talks fall through, Merkel could be forced either to govern with an unstable minority government or to return to the polls and ask voters to think again -- with the risk that more will turn to the far-right Alternative for Germany (AfD).

Divided partners

But the SPD is deeply divided on whether to back her for chancellor for a third time, with opponents in the party pointing to a crumbling of support for the 155-year-old movement from almost 35 percent of the vote in 2005 to just 20.5 during the Merkel era.

Leader Schulz must return from the talks with trophies to display to his rank and file, torn between the desire to renew themselves in opposition to Merkel and the urge to put country over party and back a stable government.

Major sticking points are reportedly reform to Germany's two-tier public and private health insurance system and setting limits to temporary work contracts, questions the SPD is determined to address in the coalition agreement.

No deal was in sight on those two points by Wednesday morning, news agency DPA reported.

On the pressing issue of reform to the European Union and euro single currency, CDU and SPD have agreed in principle to French President Emmanuel Macron's proposals, especially to outfit the eurozone with its own budget for investments managed by a joint finance minister, a draft of the coalition accord seen by AFP showed.

The delay in building a government in Germany has left Paris and other European capitals anxious and has diminished Merkel's international stature as the leading stateswoman in Europe -- and perhaps even "leader of the free world", as she was dubbed by some media outlets in the wake of Donald Trump's election.

Although it came first in the September polls, her CDU notched up its worst score in an election since the founding of the modern German state in 1949.

And widespread anxiety about Merkel's opening of the country to more than one million migrants and refugees since 2015 has borne the far-right AfD into parliament for the first time, complicating coalition arithmetic.

After a first attempt to form a coalition with the ecologist Greens and the pro-business liberals fell through in November, Merkel was forced to turn to the reluctant SPD for talks while she and her ministers worked on as caretakers.

Even if a deal is finally found, SPD leaders will have to submit it a vote by more than 460,000 party members, which could be completed by early March.