BERLIN (BLOOMBERG) - Angela Merkel's own party bloc is making her life more difficult as hardliners seek to force the German chancellor to shift to the right in talks on setting up a government.
After more than three months of post-election stalemate, Merkel is seeking a commitment this week from the rival Social Democratic Party (SPD) to start formal negotiations on extending their governing alliance.
Any coalition pact also has to accommodate her conservative Bavarian sister party, the Christian Social Union, and its tough line on immigration and European policy.
Merkel's 12 years in office are feeding a growing sense in parts of her bloc that the exploratory talks that began on Sunday (Jan 7) are the last chance for the current crop of leaders to stay in power.
The acting chancellor along with SPD head Martin Schulz and CSU chief Horst Seehofer - soon to be replaced as Bavarian state premier by a younger leader - are all vulnerable to a shifting public mood that is sceptical of another "grand coalition."
"All three party leaders have a strong personal interest in the success of the coalition talks," said Holger Schmieding, chief economist at Berenberg.
A deal might involve the SPD allowing curbs on migration demanded by the CSU in return for expanded health and old-age benefits, he said.
The talks resume at 9am on Monday (4pm Singapore time, Jan 8) in Berlin.
Schulz told Merkel and Seehofer privately last week that his political career will be over if the CSU, SPD and Merkel's Christian Democratic Union can't put together a government, Bild newspaper reported on Saturday. Seehofer agreed and appeared to suggest that Merkel faces the same risk, Bild said.
The two sides are seeking to finish exploratory talks by Thursday.
If there's enough common ground, SPD leaders would ask a party convention on Jan 21 to back full-fledged negotiations on a policy blueprint for a government.
Many SPD members are wary of serving as Merkel's junior partner for a third time after the party's support plunged to the lowest level since World War II in an inconclusive national election in September.
The SPD convention "is the biggest risk for Martin Schulz," Schmieding said.
Merkel, 63, is regrouping after her attempt to build a patchwork government with the pro-market Free Democratic Party (FDP) and the Greens fell apart in November.
She viewed the FDP's walkout as an attempt to weaken her standing, rather than a result of policy disagreements, a person familiar with her thinking said at the time.
Modern Germany's longest political deadlock since World War II has put decisions on hold on everything from euro-area policy to government spending, migration and social programs. If the coalition bid fails, Merkel may end up leading a government without a parliamentary majority or face a repeat election in which she has said she'll run again.
Bavaria's CSU staked out its stance in a Die Welt newspaper op-ed by Alexander Dobrindt, the party's parliamentary leader. He said the party is the vanguard of a "conservative revolution" that rejects excessive immigration, political correctness and overbearing government.
The positioning reflects the impact of the Alternative for Germany party, which entered the federal parliament with 12.6 per cent of the vote in September after vilifying Merkel for refusing to shut Germany's border to refugees.
Merkel's bloc won the election with 32.9 per cent, its worst result since 1949.
Personal familiarity and budgetary leeway created by Germany's economic boom may smooth the way to a deal. Merkel has governed with the SPD for eight of her 12 years in office in a "grand coalition" of Germany's two biggest parties.
"While no immediate challenger is in sight, it does mean that it is now more important than ever for her to demonstrate that she can deliver on the one thing even dearer to CDU-CSU than their conservative profile: being in government and running the country," said Carsten Nickel, managing director for Europe at Teneo Intelligence in Brussels.