Merkel hopeful of renewed coalition talks

German Chancellor Angela Merkel said she was optimistic that renewed talks between her Christian Democratic Union (CDU) and the Social Democratic Party (SDP) would break the nation's political stalemate.

The five-day long talks between the two parties began on Sunday, almost four months after Germany's federal elections on 24 September failed to provide the CDU, and its sister party the Christian Social Union (CSU), with a majority in the Bundestag.

"I think we can do it. We will work very quickly, very intensively. That's what we set out to do," Merkel said on Sunday.

"I am optimistic about these talks, but I also know that there is a lot of work ahead of us in the coming days. We are willing to take on the work," she added.

SPD general secretary Lars Klingbeli said the discussions had been of a "serious, constructive and open" nature.

According to Reuters, the two parties had already reached an agreement to provide income tax relief for high earners, a key election promise by Merkel's conservative party, with the initial agreement raising the bar for the top income tax rate to €60,000.

While the compromise on taxation was a small first step down a long road, it was seen as an indication that the SPD was willing to bridge one of its major differences.

Martin Schulz, Merkel's SPD counterpart, has vowed to put any agreement made with the CDU up for vote by party members, many of which had been vocally outspoken against any coalition between the two parties.

If the talks failed, Merkel could look to form a far less stable minority government with the Greens, but has said she would prefer to pursue new elections than go down that path.