New German government

The leader of the Free Democratic Party (FDP) Guido Westerwelle said his party will take as much time as necessary for the upcoming talks with the Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU).

The negotiations will be held "quickly, but also carefully," Westerwelle said on Tuesday. The main priority was the thoroughness of the agreements with the CDU/CSU, he said.

The talks will determine the government program and distribution of ministerial posts between the conservatives and liberals. The parties won a joint parliamentary majority in the country's general election on Sunday.

Westerwelle already met with Chancellor Angela Merkel on Monday. He said the talks with the head of the CDU were held "in the best of atmospheres." But he added that coalition talks "were never easy." Merkel's CDU would like the new coalition negotiations to be completed in five to six weeks.

"On November 9, the 20th anniversary of the fall of the Berlin Wall, I would like to greet the many European heads of state and government and other guests with a new government," Merkel said.

Taxes and health top the agenda

A major sticking point in the negotiations will be tax cuts. Both the CDU/CSU and the FDP have said they plan to cut taxes in the new government - despite a record-high budget deficit and warnings of cuts in social services.

But both sides have different ideas on the tax reform. The FDP's general secretary Dirk Niebel said they would remain tough in negotiations over taxation.

"We only ever had a single condition in the election campaign: We need a real structural tax reform, a simplification and relief in the tax system," Niebel told Germany's Phoenix television.

CDU proposals on tax reform have been more modest, envisaging a two-stage adjustment for taxpayers over the next four years.

Merkel wants centrist policies

The FDP would also like to make it easier for firms to hire and fire workers. But Merkel has indicated she will pursue a fairly centrist course and could temper such moves. Industry lobbies, however, have not held back from demanding greater freedoms.

"We need more flexibility in how the labor market is organized," Dieter Hundt, head of the BDA employers' federation, told German daily Der Tagesspiegel.

The German charity association Paritaetische Wohlfahrtsverband said the tense economic situation allowed no leeway for tax breaks. Cuts in benefits would lead to even greater social division.

"Germany is standing before its most crucial test since its founding and is more socially divided than ever before," said the charity's manager Ulrich Schneider on Tuesday. "In these difficult times of crisis, we need social policies with backbone and judgment."

In addition to tax issues, the complex and controversial health care fund will also be a bone of contention. Niebel said that the FDP would like to do away with the existing funding system which was introduced by the previous government.

"We will certainly discuss it very intensively in the coalition negotiations," he told the German daily Hamburger Abendblatt on Tuesday.

But Merkel has already said the fund was not up for debate.

Cabinet posts still unclear

No agreements existed yet on future cabinet posts, according to Westerwelle,

"That comes at the end," said Westerwelle, who has never held a ministerial post. He is expected to become vice-chancellor and foreign minister in the new cabinet, a post often reserved for the junior coalition partner.

Westerwelle, who has headed the FDP since 2006, goes into the coalition talks with his party strongly behind him. On Tuesday, the new FDP parliamentary group confirmed his position as its leader without a dissenting vote.

The centre-right partners last ruled together between 1982 and 1998 under Helmut Kohl. Merkel said she didn't expect the government work to be easier with the FDP than with the previous coalition partner, the Social Democrats SPD.

"Coalitions are, after all, not marriages of love," Merkel said.

sac/dpa/AP/AFP/Reuters
Editor: Michael Lawton