Germany’s beleaguered chancellor returned to the negotiating table on Sunday with politicians from the Social Democratic party (SPD) and representatives of her Bavarian sister party, the Christian Social Union (CSU), to stave off the end of “Merkelism” by re-establishing the coalition that governed Germany from 2013 to 2017.

Angela Merkel’s efforts will involve tough bargaining with the centre-left, which eyes control over the country’s well-stocked state coffers as a reward for entering a new coalition – in the knowledge that failure of the talks could spell the end of the Merkel era.

“I think that it can be done. We will work very swiftly and very intensively,” Merkel told journalists as she arrived at the Social Democrats’ headquarters on Sunday.

“I am going into these talks with optimism. At the same time it is clear to me that we will have an enormous piece of work in front of us over the next few days but we are willing to take it on and to bring a good result.”

Following the collapse of talks to form an unorthodox “Jamaica” coalition with the Free Democrats and the Green party in November, a centrist alliance would guarantee the leader of the Christian Democratic Union (CDU) her best chance of a stable government for a fourth term in office.

But historically poor results for both parties at last September’s elections mean that a new “grand coalition” could barely lay claim to such a name, and sliding polls are increasing pressure on the two political tribes to retreat behind orthodox party lines.

The SPD leader, Martin Schulz, who has previously ruled out forming a coalition with Merkel, has to win over a highly sceptical party membership that will get a final vote on whether to enter an alliance with the CDU, and is likely to seek protections for increased social security spending and infrastructure investment.

Key figures in the SPD believe Schulz can only guarantee such promises by laying claim to the previously CDU-run finance ministry. A centre-left finance minister could relax Germany’s balanced budget rules and work to meet French president Emmanuel Macron’s goals for reforming the eurozone.

The previous SPD leader Sigmar Gabriel’s decision to pick the economic and foreign ministries as trophy posts in 2013 is now widely seen within the party as a strategic mistake. But Schulz’s proposals will meet fierce resistance from the conservatives on the other side of the table, many of whom look towards the rightward-lurching government of the new Austrian chancellor, Sebastian Kurz, as a model to emulate.

Former transport minister Alexander Dobrindt called for a 'conservative revolution' against a left-liberal mainstream

Facing state elections in Bavaria in the autumn this year, Merkel’s allies in the CSU in particular have ratcheted up their rhetoric. Politicians from the party have over the past week called for cuts in benefits to refugees, mandatory age tests for asylum seekers, and extending the suspension of Germany’s policy to reunite refugees with their families.

In an comment article for the newspaper Die Welt, former transport minister Alexander Dobrindt called for a “conservative revolution” against a left-liberal mainstream he saw as typified by the culture of Berlin’s Prenzlauer Berg district – a hotbed of dissident culture in 1980s East Germany, now itself a byword for gentrification.

At Friday’s party conference in Seeon-Seebruck in southern Bavaria, the CSU leader, Horst Seehofer, risked antagonising Merkel by inviting the Hungarian prime minister, Viktor Orbán, the European Union’s most vocal critic of the German chancellor’s open-borders stance during the 2015 refugee crisis. The populist leader said on Friday he believed 2018 would be “the year of restoring the will of the people in Europe”.

Merkel, meanwhile, goes into negotiations from one of the weakest positions of her leadership. A survey by the public broadcaster ARD has shown that more Germans prefer fresh elections to a renewal of last term’s grand coalition. A majority (69%) of those polled said Merkel’s party had failed to address concerns caused by the refugee crisis, and her personal approval ratings have dropped since the September elections. However, 53% still say that they would approve of Merkel being the next chancellor, and as many as 93% said she remained a good chancellor.

The 63-year-old has rejected a so-called “KoKo” or “cooperation coalition” option floated by the Social Democrats, which could involve the SPD and the CDU/CSU forming an alliance and agreeing on some issues while leaving trickier points to parliamentary debates.

Shortly before Christmas, the tabloid Bild quoted the senior CDU politician Norbert Lammert as saying that Merkel would step down if talks with the Social Democrats collapsed and there were fresh elections – comments which the former leader of the Bundestag later denied having made.

German media have tipped the Saarland state premier, Annegret Kramp-Karrenbauer, as one of the few successor candidates who would fit Merkel’s mould of pragmatic centrist conservatism. But the CDU politician is relatively unknown even in her own country, and would need a spell in a ministerial post to build up her profile.

One leading German public intellectual has predicted that the next government is unlikely to last a full four-year term, even if Merkel and Schulz manage to come to an agreement in the coming weeks. “We are in a transition phase,” said the political scientist Herfried Münkler in an interview with Die Welt. “Since we are not used to transitional phases – unlike the Italians, for example – the end of Merkelism is a special situation for us, and an exciting one.”

Why the once-durable Merkel may not last much longer | Anne McElvoy Read more

Münkler, who is also a bestselling author of books on global history, said that any political era required a phase of renewal and revitalisation after around 25 years. “We are without doubt in the middle of such a phase,” he declared, “where the decline of a politically leading figure goes hand in hand with significant changes in the surrounding conditions.”

Exploratory talks are expected to last for about a week. On 21 January, SPD delegates will decide at a special party conference whether to start proper talks, which could last until mid-February. The Social Democrats will then allow their membership a vote on whether to enter a coalition with the CDU.

STICKING POINTS

Immigration



Wrangling over fallout from the European refugee crisis dominated last year’s failed coalition talks with the liberal Free Democratic party and Greens, and is likely to top this year’s negotiations agenda. While the two parties will easily agree to speed up deportations of rejected asylum seekers, Martin Schulz, leader of the centre-left Social Democratic party, rejected conservative proposals to extend the current ban on reuniting refugees with their families, which runs out on 16 March.

Healthcare



The SPD wants wholesale reform of health insurance, equalising the contributions made by employers and employees and unifying the two-tier system of private and public health insurances. Politicians from Merkel’s CDU say the plans would put private health insurers out of business.

Infrastructure



Germany’s two big centre parties may find it easier to find common ground on investing in the country’s healthy fiscal surplus in a marquee infrastructure project, such as a state-funded house-building programme to take steam out of the overheating rental market in cities.