BERLIN (Reuters) - German Chancellor Angela Merkel has signaled her readiness to accept the Social Democrats' (SPD) demand for a legal minimum wage in order to secure their agreement to form a governing coalition, as negotiations enter the final stretch.
Merkel began preparing her conservatives for a compromise by telling a Christian Democrats (CDU) youth rally late on Friday that the 8.50 euros per hour pay floor which the SPD demands "will play a role" in future.
"It won't be our vision of a minimum wage," she added, conceding her party was unlikely to get its own way over the SPD on the issue.
Merkel won a third term in September's election but lacks her own majority and her centre-right partners, the Free Democrats, crashed out of parliament. That forced her to seek a deal with the SPD, which had its second worst result of the post-war period but remains Germany's second-biggest party.
Merkel wants to form a government by Christmas and talks on policy compromises should culminate in the next 10 days.
The SPD has given up its campaign promise to hike taxes on the rich but will not budge on the minimum wage. Nearly half a million SPD members will vote on the coalition deal by early December, injecting more uncertainty into the whole process.
The conservatives are in favor of setting minimum wages - but on a sector-by-sector basis, at levels agreed by employers and workers rather than decided centrally in Berlin. For the SPD, it is 8.50 euros across the board - or no coalition.
"Now you have to deliver, dear conservatives," SPD Chairman Sigmar Gabriel told a party congress in Leipzig on Saturday.
Merkel's parliamentary leader Volker Kauder also prepared for a compromise by telling the mass-circulation Bild am Sonntag paper, in comments released before publication, that "growth and employment must not suffer" from its introduction. Some business leaders are worried that it will undermine competitiveness.
Kauder said it might be wise to introduce the minimum wage more gradually in the former East Germany - where pay is lower and unemployment higher - to avoid putting jobs at risk. But trade unions who back the SPD might find that hard to accept.
The SPD is also demanding concessions on dual citizenship for non-European Union nationals, which Merkel's conservatives have long opposed. It is a big issue for the Turkish minority - on which Merkel now also seems ready to compromise.
(Reporting by Stephen Brown, Holger Hansen and Anreas Rinke; Editing by Alison Williams)