German Chancellor Angela Merkel's Christian Democrats (CDU) and the pro-business Free Democrats (FDP) have announced that a coalition would most likely be finalized by next week. CDU and FDP representatives admitted that they still have not been able to agree on tax cuts or how to finance them, but other issues, such as financial regulation and how to deal with Turkey's bid for the European Union, have been settled.

The heads of the three parties involved, Angela Merkel (CDU), Guido Westerwelle (FDP) and Horst Seehofer of the Bavarian Christian Social Union (CSU) a sister party to the CDU, plan on continuing negotiations with other party leaders into Sunday night.

The prospective coalition partners are keen to lower taxes, though there is a lot of debate over how large they should be. The CDU has proposed 20 billion euros ($30 billion), but it is still unclear how they will be able to finance them as Europe's largest economy struggles to pull itself out of it's deepest economic slump in 60 years.

The biggest item on the agenda - the division of the various government cabinet posts - will be the last thing to be decided, and final names aren't expected until the end of next week.

Agreement on nuclear power

The two sides have agreed on extending the running time of the country's nuclear power plants along with the expansion of environmentally friendly energy sources. Economics and Technology Minister Karl-Theodor zu Guttenberg announced on Saturday that nuclear power would merely be a carryover technology.

"We have made regenerative energy one of our main goals," he said, adding that both parties see them as an integral part of the future. While the energy plan of the new coalition has been hammered out, there is no exact date for how long the nuclear plants will continue to run.

A working group drawing up policy on economic matters said the parties had agreed to cut the costs of bureaucracy which would especially help small and medium-sized businesses.

The parties are also wrangling over Germany's health fund which needs a 7.5 billion euro cash injection. The new coalition will keep the fund, which the FDP had wanted to abolish, but make big changes to it, said leading CDU member Ursula von der Leyen.

mrm/dpa/Reuters/AP
Editor: Ranty Islam