Chancellor Angela Merkel's conservative Christian Democrats and the liberal Free Democrats start coalition talks on Monday to form a new government, but they will first have to agree on a wide range of policy issues.
CDU and FDP will share power in the Reichstag
A good week after winning the general election, the two sides are gathering in Berlin with a slew of negotiators to hammer out the differences between what they have been saying in public and where they are willing to compromise in private.
The Free Democrats (FDP) have gone on the offensive with the Bavarian state party leader, Sabine Leutheusser-Schnarrenberger, who is also a possible candidate for justice minister, arguing that the Christian Democrats (CDU) cannot simply dictate what can, and cannot, be done. "They know our election platform and they know which of their policies we have criticized in recent years," she said.
Merkel and Westerwelle are heading into tough coalition talks
The key issues in the coalition talks, FDP leader Guido Westerwelle has said, will be taxes, finance policies, the national deficit. Equally high up on the agenda will be domestic security, labor market and health system reforms, and securing future energy resources.
Stark differences have already emerged
The FDP wants to dismantle the national health fund, which was only introduced at the beginning of this year; a tall order that Chancellor Merkel rejects. But, either way, with a rapidly aging population and shrinking workforce, Germany urgently needs to revamp its employee-financed health care system.
The FDP insists on making it easier to fire employees, while opposing the introduction of sector-specific minimum wages. The CDU wants to keep the minimum wage accords agreed on with the Social Democrats in the outgoing government and opposes labor market reforms. The FDP has indicated, however, that this is not a top priority.
Clashes are all but certain on topics like domestic security where the FDP vehemently opposes online searches and other measures, which they claim undercut personal data protection. The CDU argues that these measures are necessary to combat terrorism and the growing scourge of Internet crime.
Government surveillance has stirred opposition
On energy issues, both parties have said they would like to extend the operation of Germany's 17 nuclear power plants. There is currently a law that calls for phasing out nuclear energy by 2020.
Although they agree on an extension, they differ on how the profits earned from that should be used. The CDU wants to use them to keep electricity prices down, while the FDP wants to reduce subsidies for renewable energy.
Tax cuts and the deficit
On the deficit, the FDP wants to cut spending, which is expected to be twice the European Union limit next year. The FDP says it wants to axe state subsidies, end the "waste" of taxpayer's money and reduce military spending. Merkel has rejected wholesale spending cuts, while some in her party have suggested raising the sales tax - an idea Merkel has dismissed.
The tax issue will perhaps be the toughest nut to crack in the coalition talks in light of Germany's gaping budget deficit.
Cutting expenditures and taxes will be difficult
FDP General-Secretary Dirk Niebel has called for "a major tax structure reform" and said he was confident that "a coalition consensus could be reached for the next four years."
But, that may be easier said than done. Saxony's CDU state premier Stanislav Tillich urgently warned against lowering taxes, saying "the coalition talks must not agree on budgetary measures that burden our children and grandchildren."
The position of the CDU's Bavarian sister party, the Christian Social Union (CSU), however, is more in line with the FDP. CSU General-Secretary Alexander Dobrindt has said "only investment in the economy and in jobs can lead to more employment and the retention of jobs. That ultimately also leads to more financial flexibility." "Cuts in social welfare programs would not be necessary," he added.
The tax cuts proposed by the CDU would amount to about 15 billion euros ($21.8 billion) annually. The FDP has promised cuts worth up to 35 billion euros and wants to implement them soon. The party also wants to simplify the tax system. FDP finance spokesman Hermann Otto Solms said his party would not "chicken out" of its campaign pledge.
Editor: Andreas Illmer