After three weeks of negotiations between the Christian Democrats, the Christian Social Union and the Free Democrats -- the parties that will form Germany's governing coalition -- broad outlines of policy decisions are becoming clear as the parties push to finalize a deal by Saturday.

During nine hours of talks which began on Thursday and stretched into the early hours of Friday, the parties tackled sticky issues such as healthcare funding, nuclear energy and foreign policy.

Several party leaders told reporters outside the meeting in Berlin that a deal was close to being reached after the parties had struggled to reconcile their promises of tax cuts with pledges to get Germany's budget deficit under control.

"We'll have a result Friday evening or Saturday morning at the latest," said Christian Wulff, a leader of Merkel's own Christian Democrats (CDU) and the premier of the state of Lower Saxony. "There are a few open issues. It makes sense to take the time to get it right."

The parties have set a Saturday deadline to wrap up negotiations as Angela Merkel has said she wants to officially get the new government constituted by November 9, the 20th anniversary of the fall of the Berlin Wall.

The parties are meeting on Friday and by Saturday morning, the coalition agreement, running about 250 pages, should be complete.

Several policy directions are already known, such as scrapping a 2000 decision to phase out Germany's nuclear power program by 2020. The life of some reactors will be extended.

Coalition partners also want to increase spending on education by 3 billion euros ($4.5 billion) annually.

In foreign policy, the new government wants to press Afghanistan to take on more responsibilities so Germany can wind down its mission there.

Budgets and healthcare

After the meeting wrapped up at 1 a.m. on Friday, CDU leader Merkel and Free Democrat (FDP) boss Guido Westerwelle slipped out a side door.

Of the party leaders, only Horst Seehofer, chairman of the Christian Social Union (CSU), the Bavarian sister party of the CDU, spoke to reporters.

He said the parties had made progress on healthcare reform measures, which had been high on the agenda and has been one of the thorniest issues in the talks. He did not provide any details.

The challenge is how to make up for an estimated deficit of millions facing Germany's health insurance system.

All in all, Germany is facing a shortfall of 50 billion euros ($75 billion) or more in health and unemployment insurance programs.

The parties had floated the idea of passing a supplementary or "shadow" budget for 2009 to plug the hole, but abandoned the plan after legal experts said it might violate the country's constitution known as the "Basic Law."

Merkel needs to find the 50 billion euros in order to deliver on tax cuts of 20 billion euros that were part of her campaign pledge. She has ruled out raising unemployment and healthcare contributions to make up for the shortfall, as that would nullify the impact of tax cuts.

The chancellor has also ruled out making sharp cuts in government spending, since she believes this could hurt her party's chances in a crucial upcoming state election.

jam/AP/Reuters
Editor: Chuck Penfold