Merkel's party in decisive talks on coalition

German Chancellor Angela Merkel's conservatives held a third round of exploratory talks Thursday with the Social Democrats (SPD) on forming a coalition government to rule Europe's largest economy for the next four years.

The meeting Thursday afternoon is the last one scheduled to outline a deal between the two biggest parties in Germany, before a SPD congress Sunday when the party leadership would consult with senior delegates on forming a grand coalition, Xinhua reported.

Merkel's Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), have held two rounds of exploratory talks with the SPD and the Greens, the two potential partners.

But the Greens ruled out further talks Wednesday leaving the SPD as Merkel's only coalition choice.

The CDU/CSU bloc was the biggest winner with 41.5 percent of votes in the federal election in September, while the largest opposition party, the SPD, took 25.7 percent of votes. The Green party captured 8.4 percent.

Without a majority of the parliament seats, the CDU/CSU bloc has to find a partner to form a coalition for the next four years.

A grand coalition with the centre-left SPD as in Merkel's 2005-2009 first term is supported by most Germans, recent polls showed.

However, coalition horse-trading may prove to be difficult and time-consuming due to policy differences.

A particularly conflict-prone topic would be the nationwide legal minimum wage.

The SPD has stressed greater social justice and reiterated the plan to introduce a national minimum wage of 8.50 euros ($11.35) per hour.

Merkel's party opposes national minimum wage but supports minimum wage deals struck by employers and trade unions in different industry sectors and regions.

Merkel reiterated her opposition to the national minimum wage Wednesday on concerns that it would destroy jobs.

Germany's leading economic institutes Thursday also warned in a report that the introduction of a minimum wage of 8.50 euros per hour could lead to significant job losses in eastern Germany.

The report showed that 11 percent of workers in western Germany earn less than the proposed 8.50 euros an hour, while one quarter of workers in eastern Germany earn less than the amount.