By Andreas Rinke
MUNICH, Germany (Reuters) - German Chancellor Angela Merkel said on Friday she expected a difficult final few days of coalition negotiations but was hopeful that her conservatives and the Social Democrats would reach agreement on a new government next week.
Her conservatives emerged from the September election as the strongest force but need a partner. The SPD were a distant second and have been in talks for a month with Merkel's Christian Democrats (CDU) and their Bavarian sister party, the Christian Social Union (CSU), about forming a "grand coalition".
"We'll try to finish it but these next days will be difficult," Merkel told the CSU party congress in the Bavarian capital of Munich.
"We've got clear ideas about what we want. But nevertheless we'll have to accept compromises ... Hopefully we'll be able to form a government. But it won't be easy."
The parties have set next Tuesday as the deadline for a deal to give them time to have a government sworn in before the end of December.
Working groups are hammering out compromises on a wide range of issues, from the economy and banking to the euro and energy. They will present final proposals to party leaders, including Merkel and SPD chairman Sigmar Gabriel, next week.
The CSU had an especially strong result in Bavaria, and her warnings of the need to compromise with the SPD were met by an awkward silence from the hall, although her speech was nevertheless applauded warmly at the end.
The SPD, wary after suffering in Merkel's shadow in a similar coalition in 2005-2009, will put the deal to a postal vote of its 473,000 members, with the result not expected until December 14.
An opinion poll in Bild newspaper found 44 percent of SPD members opposed to the coalition and 49 percent in favor.
The two sides, historically rivals, have reached or are near agreement so far in a number of less contentious issues including the introduction of a national minimum wage.
They have also agreed to revise the renewable energy law while keeping a moratorium on shale gas fracking. They have agreed to tackle rising rents in big cities with rent controls.
One of the main unresolved issues is a CSU demand for a motorway toll for foreign drivers. The SPD is against charging only foreigners and Merkel's CDU is also wary.
Merkel said the sister parties were working on a way to have foreign motorists pay without violating European Union rules. She said, however, she would not agree to anything that would lead to greater burdens on German motorists.
"We don't want to sneak in any tax increases," she said.
(Reporting by Andreas Rinke; writing by Erik Kirschbaum; Editing by Kevin Liffey)