Germany’s two main parties say they have take a major step towards agreement on forming a left-right coalition. The Christian Democrats, led by Angela Merkel, have been in talks with the Social Democrats following inconclusive elections in September.They have set themselves a deadline of Saturday to finalise a deal on a so-called grand coalition. Because the two parties would normally be opponents the process involves some hard-bargaining. But, after a fifth round of negotiations, they are said to have reached agreement on reforming Germany’s complex federal structure and to have made progress on the more divisive issue of public finances. The parties have to settle how they will reduce the country’s budget deficit by 35 billions euros to comply with EU rules. The CDU wants to raise VAT but the SPD says that can only happen if tax for top earners is increased.
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