German coalition talks drag on, president warns Europe at stake

Chancellor Angela Merkel was struggling Friday to find a coalition deal with Germany's second biggest party, as a last-ditch round of negotiations goes down to the wire with "big obstacles" left to clear.

After 18 hours of talks and still no agreement in sight between Merkel's conservatives and the centre-left Social Democrats, weary negotiators said a result would likely not emerge before dawn.

Questions surrounding Germany's 2015 record refugee influx as well as issues related to the country's finances were sticking points even as Europe's biggest economy posted healthy growth for 2017 and a record surplus.

Merkel, who desperately needs to form a new government to salvage her political future, had warned that it would be a "tough day" of talks.

She said her conservative Christian Democrats would "work constructively to find the necessary compromises but we are also aware that we need to execute the right policies for our country".

September's inconclusive elections left Merkel without a majority and she has struggled to find partners to govern Europe's biggest economy.

After her earlier attempt at forging a coalition with two smaller parties collapsed, she is now pinning her hopes on renewing an alliance with the Social Democrats (SPD).

SPD leader Martin Schulz also spoke of "big obstacles" on the last day of preliminary talks in which the parties were sounding each other out over whether to move on to formal coalition negotiations.

The talks are not only crucial for Merkel, but also for Schulz and the leader of Merkel's Bavarian allies, Horst Seehofer, said political analyst Karl-Rudolf Korte of Duisburg-Essen University.

"The negotiations are not just about a coalition, but also their careers. It would be the end for all three if this coalition does not come about," he told public broadcaster ZDF.