German parties clash before key coalition meeting

BERLIN, May 13 (Reuters) Germany's ruling parties clashed at the weekend over the introduction of a national minimum wage and the funding of new childcare places ahead of tomorrow's coalition meeting aimed at resolving the divisive issues.

German Chancellor Angela Merkel's conservatives and their Social Democrat (SPD) coalition partners have been battling for months on funding for a massive increase in nursery spots and SPD demands for a new minimum wage across industrial sectors.

The showdown is one of the fiercest since the rival parties were forced into a ruling partnership at the end of 2005.

''Wherever possible, we want to strengthen wage autonomy,'' Merkel told German weekly Bild am Sonntag when asked about the minimum wage idea. ''The state should only act when employers and unions are unable to establish fair wages on their own.'' The centre-left SPD, keen to win back the support of blue-collar workers who have fled the party in droves, have been pushing hard for a minimum wage.

Labour unions want a minimum hourly wage of 7.50 euros (.17) to protect German workers from wage dumping -- undercutting by cheap foreign labour.

But Merkel and members of her Christian Democrats (CDU) say wage setting must reflect differences in various sectors of the economy.

They have warned a new minimum wage could cost jobs -- a view SPD chairman Kurt Beck rejected today.

''The argument that this will lead to job losses is without any foundation,'' Beck told German radio.

In the Bild interview, Merkel also rejected a proposal by the SPD to grant parents a guaranteed right to childcare spots as soon as their children reach the age of one year.

Merkel's Family Minister Ursula von der Leyen has a competing plan to increase the number of nursery places so that a third of all three-year-olds have access to childcare by 2013.

The parties remain at odds over how to fund the plan, with Merkel saying the federal government could use surplus tax revenues to pay one-third of the estimated 12 billion euro cost and the SPD demanding existing funds be redirected.

Von der Leyen's plans, which have proved popular with voters, are designed to help more women return to work after having children in a country that has traditionally assumed new mothers will put their careers on hold.

One area where the coalition partners appeared to be nearing a compromise over the weekend was tax policy. Sources said a deal had been reached on a reform of inheritance taxes -- a move the SPD had linked to its approval of a draft law to overhaul Germany's corporate tax regime.

REUTERS TB PM2035