Merkel's party softens on tax issue to win over potential coalition partner

German Chancellor Angela Merkel's conservative Christian Democrats (CDU) may agree on tax rises in order to form a coalition government with the center-left Social Democrats (SPD), CDU officials suggested on Wednesday.

Finance Minister Wolfgang Schaeuble suggested in an interview with the newspaper Die Zeit that his CDU party might compromise on the issue of tax rises, a topic that has seen different opinions from the two biggest political parties during the election campaign.

"Let's wait and see how the talks go," Schaeuble said. He called for swift coalition talks so that a new government can be formed to make important decisions in European politics.

Norbert Barthle, another senior member of parliament for the CDU, also told local media that he could imagine raising the top tax rates in exchange for tax cuts at the bottom.

The SPD sees differently on major domestic issues from Merkel's CDU and its Bavarian sister party the Christian Social Union (CSU), which may lead to tough and long coalition negotiation talks.

The SPD has stressed greater social justice and wants to raise taxes on incomes above 100,000 euros (about 135,000 U.S. dollars) to 49 percent from 42 percent. However, Merkel said such tax hike plans would risk spoiling the good economic situation in the country.

The the center-left SPD, which took 25.7 percent of votes in Sunday's election, will hold a party conference in Berlin on Friday and try to reach consensus on the coalition issue.

Opinion polls suggested that most Germans would support a coalition between Merkel's conservatives and the SPD, the two biggest political parties in Germany, to form a stable government and rule the Europe's largest economy for the next four years. Merkel headed such a "grand coalition" during her first term in 2005-2009.

However, Merkel and her conservative bloc may have to make big concessions on major policies and cabinet posts in order to win over the SPD as the center-left party suffered the worst ever federal election result after the previous coalition.

Merkel's CDU/CSU bloc proved to be the biggest winner with 41.5 percent of votes in the federal election. However, without an absolute majority of the parliament seats, CDU/CSU union has to find a partner to form a coalition.