German parties talk through the night, no end in sight

Merkel strikes preliminary deal to hold power in German coalition

Agreement reached on basis for German coalition talks

A historically poor showing for Merkel's Christian Democratic Union (CDU) in September's vote has left the Chancellor scrambling to hammer out an agreement with the second largest party in parliament, the center-left Social Democrats SPD.

German Chancellor Angela Merkel's conservatives and the Social Democrats (SPD) on Friday achieved a breakthrough in their exploratory talks aimed at forming a new coalition government, local media reported.

Nearly 16 weeks after her party won an inconclusive federal election, Merkel's second attempt to restore leadership in Europe's dominant country yielded progress, with an agreement to move on to a shared program for government.

The leaders also reportedly agreed to abandon the country's stated aim of reducing carbon emissions by 40 percent by 2020 - though Reuters reports the blueprint "foresaw Germany generating 65 percent of its energy from renewables by 2030".

Early Thursday, Merkel had expressed optimism about a deal, telling reporters in Berlin that "large obstacles" remained but she meant to push for new compromises. The party's leader, Martin Schulz, envisions Germany as part of a "United States of Europe".

Borissov's comments reflect the growing unease among Germany's European Union partners as the coalition talks dragged on for months.

Merkel's conservatives and the SPD also agreed to raise the threshold for the top income tax rate of 42 percent to 60,000 euros ($72,000) a year from a current 53,700 euros, another source said.

"We've been here for 24 hours and I wasn't sure we would succeed", Merkel said.

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In a session that started on Thursday morning and lasted more than 24 hours, Mrs Merkel's Christian Democratic Union, the Bavarian-only Christian Social Union and the Social Democrats hammered out a 28-page document outlining compromise positions on a range of issues including taxes, migration and health care.

Although Merkel won German elections last September, she did so without a majority enough to form a government.

After a disastrous election in September, and one round of failed coalition talks behind her, Dr Merkel is hoping to woo the SPD back into power.

It marked the first time far-right MPs had made into the Bundestag in more than half a century.

He told Der Spiegel Online there was a good chance party members would reject any plans for a "grand coalition". It will be with that approval when meetings begin between two parties to try to close final agreement to reach grand coalition.

"If that doesn t happen, then Martin Schulz will have great difficulties.to convince party members of the necessity of this grand coalition", he said. The dominance of the SPD and the conservatives long ensured smooth government transition.

If the two sides fail to form a coalition, a new general election is likely. The number allowed to enter the country has been set at 220,000 per year.

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