While the German economy goes from strength to strength, her Christian Democratic-led bloc and the Social Democrats are seeking to hold a political center that's been eroded by the rise of the far-right Alternative for Germany.
He said his party wanted to ensure that the new government committed "above all to working toward renewal of the European Union". One participant told the German newspaper Bild: "The negotiations are completely stuck".
Germany President Frank-Walter Steinmeier appealed to the negotiators Thursday to consider their responsibility toward Europe, not just their own parties and political futures. Nearly 16 weeks after her party won an inconclusive federal election, Merkel's second attempt to restore leadership in Europe's dominant country yielded progress, with an agreement to move on to a shared program for government.
"Those who bear responsibility in the institutions and parties. know that they have this responsibility not only toward the members of their own party and their own political future".
The chancellor, who commands wide respect overseas after more than 12 years in power, needs coalition talks to succeed to avoid further erosion of her personal authority and Germany's worldwide influence, not least in the EU.
Reiner Haseloff, premier of the eastern state of Saxony-Anhalt, told reporters late on Thursday that he remained optimistic and he did not expect the talks to fail.
Lawmaker Julia Kloeckner, part of the negotiating team for Merkel's Christian Democrats, tweeted a photo of the cover of the document Friday morning.
SPD vice chairman Ralf Stegner underlined the great uncertainty about a possible deal, tweeting that "scepticism was, is and remains justified".
Merkel initially turned to two smaller parties, the Free Democrats and Greens, to form a new coalition government for her forth term, but when those talks collapsed in November, she had to once more woo a reluctant SPD for a new power pact.
"What is your plan for Germany?"
The DIHK Chambers of Industry and Commerce suggested she use the fiscal windfall to simplify bureaucracy, while others pushed for tax cuts.
But SPD leader Martin Schulz, a former president of the European Parliament, is pursuing a very different vision, calling for the creation of a United States of Europe by 2025 - seen as an expensive distraction by many conservatives.
"We have done a lot of preparatory work but there are still major obstacles to clear", she told reporters Thursday.
Should the parties miss their self-imposed deadline, they could still extend the talks, but negotiators said that was unlikely. The financial daily Handelsblatt reported that the government had a stronger-than-expected surplus in 2017 and that, combined with unused funds earmarked for asylum seekers, means it has €10.4 billion more to spend than planned.
Many SPD members are wary of serving as Merkel's junior partner for a third time after the party's support plunged to the lowest level since World War II in the federal election in September. But both parties lost votes in the September 24 election, which saw the far-right Alternative for Germany (AfD) enter the Bundestag (national parliament) for the first time.
Many in the SPD rank-and-file oppose a repeat of the grand coalition as they fear it will further diminish the identity of the party, which suffered its worst result in September's vote since 1933. Later, all SPD members will be asked to vote on whether they are happy for their party to enter a grand coalition on the basis of outcome of negoations.