Chancellor Angela Merkel said on Tuesday her conservatives were willing to make “painful concessions” to seal a coalition deal with the SPD to pull Germany out of political deadlock.
A coalition deal would be a huge step forward towards the end of the political stalemate gripping Germany since inconclusive elections in September. But many in Mrs Merkel’s Christian Democratic Union (CDU) are concerned about what it would mean for their relationship with the eurozone.
German backbencher Elisabeth Winkelmeier-Becker said local party groups had expressed fears the SPD was dragging the CDU into a transfer union, which would involve the creation of a new fund to bail out struggling EU economies.
This would see German tax euros distributed across weaker euro-economies.
Ms Merkel said: “Each of us will have to make painful compromises and I am ready for that.”
She was speaking to reporters before the start of a new round of talks between the SPD and her CDU/CSU bloc, which want to finalise a four-year government programme this week.
Referring to global stock market turmoil which has gripped markets in the last 24 hours due to a mass sell off on the Dow Jones, Mrs Merkel added: “When we see the movements on the stock markets over the last hours, we live in turbulent times and what is expected of us as popular parties…is that we form a government for the good of the people, one that brings stability.”
In an open letter to negotiators in the CDU/CSU – known collectively as the Union – and members of the German parliament, the Economic Council warns a coalition with the SPD would accelerate the creation of a transfer union and lead to even more ”centralism, bureaucracy and redistribution”.
Martin Schulz, leader of the SPD called the coalition deal “a new dawn for Europe” and an “end to the diktat of austerity”.
The parties are expected to unveil a formal coalition deal later today.
Wolfgang Steiger, head of the CDU’s Economic Council, has noted the CDU’s 2013 manifesto explicitly said there would be no transfer union.
He said the party needs to avoid looking as though it is giving in to the SPD, that just views pro-European as giving money to poorer nations.
He added: “Now it’s all about European solidarity, social convergence and higher German contributions into the EU budget.”
Mr Issing, a former member of the European Central Bank’s executive committee and other conservatives see the measures proposed by the CDU and the SPD as a slippery slope towards a regime no longer based on fiscal and financial sovereignty, but instead towards mutual governance.
EU policy has been one of the most controversial themes in the negotiations so far. The SPD is keen for Berlin to follow the example of Emmanuel Macron and create a eurozone budget and an EU finance minister.
However, the Bavarian Christian Social Union (CSU) – the sister party of Merkel’s CDU – has met these demands with scepticism.
Mr Schulz has touted sweeping reforms of Germany’s health insurance system and the creation of a “United States of Europe” by 2025 – which have concerned Ms Merkel’s conservative bloc.