German Chancellor Angela Merkel’s Christian Democratic Union (CDU) and the Opposition Social Democratic Party (SPD) are expected to clinch a deal today on a new “grand coalition” at their second round of talks here.

The two sides have moved closer to an agreement after their first meeting 10 days ago and a coalition between them appeared more likely than between the Conservatives and the ecological Green party.

The CDU and its Bavarian sister party, the Christian Social Union (CSU), held similar exploratory talks with the Green party last week and agreed to meet again tomorrow.

Merkel, who is also the chairperson of the CDU, held talks with SPD Chairman Sigmar Gabriel and CSU leader Horse Seehofer without aides at the week-end, their first such meeting since the parliamentary election on September 22.

Even though the CDU and the CSU finished five seats short of an absolute majority in the new Bundestag, the Lower House of parliament, they lost control of the Government after their coalition partner, the liberal Free Democratic Party (FDP), was eliminated from Parliament as it failed to cross the threshold of five per cent of the votes.

Merkel prefers a new grand coalition with the SPD as it would ensure a stable government for her third four-year term.

The conservative bloc and the Social Democrats together will have a commanding majority of 504 seats in the 631-member Bundestag and with the SPD as a coalition partner, Merkel will be assured of a smooth passage of legislations in the Upper House which is at present controlled by the Opposition.

Merkel headed a grand coalition during her first term between 2005 and 2009.

Since the first round of talks, the SPD has toned down its demand for an agreement to increase the taxes on high-income earners. But senior SPD leaders continued to press for the introduction of a nationwide minimum wage all sectors.

The CDU and CSU vehemently opposed any tax hike. SPD general secretary Andrea Nahles had said that an agreement to introduce a minimum wage will be a condition for her party to join a coalition with the conservatives.

Without a deal to a “statutory introduction of nationwide minimum wage of €8.5, the SPD will not consider joining a coalition government,” she said in a TV interview.

Merkel reaffirmed her party’s position that the government should not get involved in introducing a minimum wage for the whole nation and it must be left to each sector to decide through talks between the employers and employees.

In her weekly radio and video address yesterday, she however, spoke in favour of setting a “reasonable” lower limit for wages, but gave no figures.

The SPD said it has convened a special party congress for the next week-end to endorse taking up of coalition negotiations with the CDU.

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