Domestic Deal

German Chancellor Angela Merkel has repeatedly shown her ability to unite world leaders, most recently by reaching an agreement on fighting climate change at this month's G8 summit, but squabbling among members of her Christian Democratic Union (CDU) and their coalition partner, the Social Democrats, has hobbled the chancellor's domestic image.

After taking over as the head of the grand coalition government in 2005, Merkel has had to work hard to find common ground between two parties that have been at loggerheads for the better part of 60 years.

But early on Tuesday, Merkel struck a deal on the minimum wage, an issue that has strained relations between the two parties in recent weeks. The deal will see minimum wage protections extended beyond construction workers and building cleaners to another 10 to 12 industrial sectors. Merkel also brokered an agreement on raising mandatory contributions to statutory nursing care, costs which are shared by workers and employers, by 0.25 percent as of July 2008 while lowering unemployment insurance payments by 0.3 percent to 3.9 percent beginning in January.

Coalition in position to govern

"I think that the coalition has shown that it is capable of solving problems," Christian Democratic Union parliamentary group leader Volker Kauder said Tuesday.

Edmund Stoiber, head of the Christian Social Union, the CDU Bavarian sister party, said the compromise represented "a whole series of improvements."

"For us it was clear that there would not be a statutory minimum wage," Stoiber said, adding that the deal reached showed "even when the starting points are very far from each other, the grand coalition can succeed at coming to an outcome."

But members of the SPD, who recent polls have shown to be trailing their coalition partners by nearly 10 percent, said the minimum wage deal, for which the Social Democrats have long pushed and the CDU has bitterly opposed, does not go far enough.

Debate to continue

"It is in no way a major breakthrough," SPD labor policy expert Klaus Brander told public broadcaster ZDF, adding that a general minimum wage would have been of greater benefit to German workers.

SPD party head Kurt Beck said the debate over a minimum wage had not ended, adding that "the political discussion will continue."

Germans seem largely in favor of a minimum wage, according to an Emnid poll showing that 60 percent of Germans were for the idea, with conservative voters also supporting the initiative.

The IW Cologne research institute said that if a 7.50 euro ($10.00) minimum wage were adopted, more than 1 million jobs could be lost to under the table work, meaning less tax income for the government and social security contributions.

Europe's largest economy, Germany has recently experienced an economic improvement and dropped its unemployment rate from 12 percent in early 2006 to 9.1 percent.