German Chancellor Angela Merkel arrived on Sunday for what many hope are her last round of talks with the Social Democrats.
Merkel's Christian Democrats have been struggling to build a governing coaltion since the general election four months ago.
"I am going in with goodwill, but of course with an expectation that we face difficult negotiations at today's meeting. We know what task we have and are trying to do it justice."
The parties have reached agreements on energy and agriculture but continue to haggle over healthcare.
SPD leader Martin Schulz was equally cautious.
"Today is a tough day of negotiations, maybe until the late evening or the night--we will see about that".
The two parties set Sunday as a deadline to conclude negotiations but budgeted two extra days as a precaution.
Even if they reach an agreement, the SPD's 450,000 members still have to vote on a final deal.