BERLIN (Reuters) - Chancellor Angela Merkel’s conservatives and their would-be partners, the Social Democrats (SPD), have made major progress in talks on forming a coalition government but remain at odds on issues like labor rules, a senior SPD member said on Friday.

German Chancellor Angela Merkel of the Christian Democratic Union (CDU) arrives for coalition talks at the Social Democratic Party (SPD) headquarters in Berlin, Germany, February 2, 2018. REUTERS/Christian Mang

As he emerged from lengthy talks that Merkel hopes will ultimately secure her fourth term and end political impasse in Europe’s largest economy, SPD General Secretary Lars Klingbeil said the parties had taken a “leap forward.”

“But we also saw that we have differences on some topics,” he said.

Senior conservative Peter Altmaier said Friday’s talks had been good and the parties were optimistic but a “very tough stretch of road” lay ahead.

The parties became embroiled in another dispute over migration on Friday, with some SPD members saying they wanted to revisit January’s coalition blueprint that said the parties did not expect annual migration to exceed 220,000 per year because they were annoyed that Merkel’s CSU Bavarian allies seemed to be considering this as an upper limit.

But SPD deputy Ralf Stegner later said the parties had reached a deal. In an apparent defeat for the SPD, the wording of that migration prediction remained the same - as pushed for by the CSU, which calls for a migrant cap.

Stegner said the figure described “expected migration numbers” and beyond that the parties stood by the right to asylum enshrined in Germany’s constitution.

He said the SPD had to make compromises: “We can’t make progress on our issues without giving something in return.”

But he trumpeted an agreement on a “modern and transparent immigration law” as a success for the migrant-friendly SPD. The parties agreed to encourage skilled migration using criteria such as qualifications, age and language skills.

The two camps aim to finalize a deal for four more years of a “grand coalition” by the end of the weekend or early next week, some four months after an inconclusive election plunged Germany into unaccustomed political uncertainty.

But Merkel said, upon arriving for talks, that they faced divisions in crucial areas, adding: “We have goodwill to overcome them, but there is still a lot of work ahead for us.”

The parties have agreed some eye-catching measures, including a 50 percent tax write-down for fleet electric cars and a 12-billion-euro public investment program to improve sluggish data networks, documents seen by Reuters showed.

In the field of labor rights, where the SPD wants to signal to its members that it has set its stamp on the deal, the SPD and conservatives agreed to the right for employees in companies with more than 45 employees to move seamlessly back and forth between full- and part-time work.

But long lines of text highlighted in yellow showed the parties had yet to decide on the exact wording of that agreement.

PROGRESS

Other agreements included to raise child benefits by 25 euros per child per month. Senior SPD member Katarina Barley said there would be a women’s quota for management in the civil service after the last government focused on this for firms.

The parties also agreed to give German authorities the ability to deprive people with dual citizenship of their German citizenship if they fight abroad for an extremist organization.

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They said they wanted to start allowing collective lawsuits. Consumer associations and politicians had called for class-action lawsuits to be made possible during the Volkswagen VOWG_p.DE diesel emissions scandal.

As he arrived for talks, SPD leader Martin Schulz said his party would insist on more progress in labor law and healthcare, where the party hopes to reduce differences in the service experienced by the privately and publicly insured.

They made some progress by agreeing to boost funds for hospitals for restructuring, digitalization and new technologies.

The center-left SPD has sagged further in polls since suffering its worst postwar result in the Sept. 24 election.

Many SPD activists, who must ratify any coalition deal in a postal ballot, would prefer to see their party reinvent itself in opposition rather than join another coalition with Merkel after serving as junior partner from 2013 to 2017.

Several politicians from both blocs suggested they may need until Monday and Tuesday to reach an agreement, with Schulz stressing they were not under time pressure. But Horst Seehofer, Merkel’s Bavarian ally, said: “So far, there is no reason to expect we will need longer than Sunday.”