Merkel's fate in balance as German coalition talks drag on

Merkel's liberal policy on refugees, which let in more than a million asylum seekers since 2015, has come back to haunt her, with a motley crew of potential partners digging in their heels on diametrically opposed demands over immigration.

After weeks of quarrelsome exploratory talks, Merkel's CDU/CSU bloc, the pro-business Free Democrats (FDP) and the left-leaning Greens are hoping to find enough common ground to begin formal coalition negotiations.

The awkward bedfellows have been pushed together by September's inconclusive election, which left Merkel badly weakened after the far-right Alternative for Germany (AfD) lured millions of voters angry over the refugee influx.

Merkel had initially said she wanted to wind up the negotiations by Thursday, but marathon overnight talks failed to produce a breakthrough.

Party leaders resumed their high-stakes haggling at midday Friday and are expecting talks to last through the weekend.

"Make up your minds," urged CSU leader Horst Seehofer, adding that he hoped "that we'll succeed on Sunday".

Peter Altmaier, Merkel's chief of staff voiced optimism about reaching a deal, saying that "the problem is solvable".

But the deputy leader of the liberal FDP, Wolfgang Kubicki, sounded more pessimistic, warning that "the positions have hardened".

Merkel herself acknowledged that "it will definitely be difficult, but it's worthwhile to go into round two today."

MERKEL'S CAREER AT STAKE

After suffering a humiliating loss at the polls, the centre-left Social Democratic Party has gone into opposition and ruled out returning to a grand coalition with Merkel.

The chancellor, who has steered Germany through crises including the global financial meltdown and the eurozone's debt woes, therefore risks having to face new elections if she fails to get the CSU, the FDP and the Greens on board.

But the potential tie-up, dubbed a "Jamaica coalition" because the parties' colours match those of the Jamaican flag, is untested at the national level, and questions abound about how stable such a government would be.

"It's not just the chancellor's fourth term that depends on the success of Jamaica, but her entire political career," the best-selling Bild newspaper said.

A 62-page working document that could form the blueprint for an agreement, seen by AFP, showed that the parties remain at odds over several issues, with migration among the most contentious.

Merkel's Bavarian CSU allies want a cap on migrant numbers, pitting them against the Greens who want to ease restrictions on family reunifications for asylum seekers.

"It is very, very important for us to stop immigration from growing," said Seehofer, who faces a crucial state election next year.

The FDP's Kubicki said his party had "tried to build bridges", urging the Greens to soften their stance.

But the ecologists appear to be in no mood to compromise after already watering down key campaign pledges to overcome deadlocks on the environment.

The Greens notably abandoned demands to shut down coal-fired power plants and phase out internal combustion engines in cars by 2030, and called on the other parties to show the same flexibility.

However, Green proposals to make more-polluting diesel cars less attractive to buyers and to close the country's 20 dirtiest coal plants have also met with opposition.

The conservatives and the FDP, who worry about job losses and disrupting the powerful automobile and energy industries, have resisted them.

NEW POLLS? NO THANKS

Despite the divisions, the parties have been able to reach some broad agreements in recent weeks.

At a time when state coffers are bulging, they have committed to maintaining Germany's cherished balanced budget, improving the nation's outdated internet infrastructure and increasing child benefits.

The parties, who are broadly pro-EU, also made headway on Europe after the Free Democrats dropped their demand to wind down the eurozone's bailout fund.

Analysts say all sides will want to avoid triggering snap polls that could end up bolstering the AfD.

And opinion polls suggest there is little appetite for a return to the ballot box, and some two-thirds of voters say they expect the coalition negotiations to succeed.

SPD party chief Martin Schulz predicted Friday that an unambitious deal would be found "on the smallest common denominator" but urged the parties to act quickly.

"Germany can't wait. Europe can't wait," he said.