* German leader’s conservatives weakened in Sept election
* Merkel meets leaders of SPD, Bavarian CSU on Wednesday
* She seeks another ‘grand coalition’, but SPD wary
* No deal could mean new elections
By Madeline Chambers and Thorsten Severin
BERLIN, Jan 3 (Reuters) - German Chancellor Angela Merkel will put her reputation as Europe’s consummate consensus-builder on the line on Wednesday, when she launches a second bid to form a coalition government after weeks of sniping between its would-be partners.
Seeking a fourth term in office, Merkel saw her authority weakened in a national election in September, when support for her conservatives was eroded by the far right.
She is now under increasing pressure to reach a deal with the centre-left Social Democrats (SPD), which also lost ground in the election, but the two sides have bickered over a range of issues, notably immigration and taxation.
At a meeting on Wednesday afternoon, Merkel will try to build trust with SPD leader Martin Schulz and the head of Bavaria’s CSU conservatives, Horst Seehofer, by agreeing a structure for talks that are due to start on Sunday and could lead to official coalition negotiations in a few weeks.
Having failed before Christmas to form a coalition with the Greens and pro-business Free Democrats (FDP), Merkel is now leading an interim government with the SPD that is keeping things ticking over in Europe’s biggest economy.
Merkel’s CDU/CSU alliance ruled in a ‘grand coalition’ with the SPD from 2013 to 2017 and, with investors fearing a protracted power vacuum that could delay reforms in Germany and the European Union, she is pressing for a re-run of that arrangement.
But the SPD has shown reluctance, with some of its members favouring a looser cooperation agreement or supporting a minority government.
The two blocs are at odds on issues from healthcare and immigration to Europe and pensions and, if no deal is done, Merkel’s future as chancellor would be thrown into doubt with new elections a distinct prospect.
In recent days some conservatives, especially from Bavaria, have stoked tensions by calling for tax cuts for high earners and reductions in benefits for asylum seekers, which the SPD opposes.
“Again verbal shenanigans from the Bavarian CSU,” tweeted one of the SPD’s deputy leaders, Ralf Stegner.
“Always the same recipe: humour the lederhosen public. No sense of reality in terms of agreeing with the other parties.”
But Seehofer sounded more conciliatory on Wednesday, saying “important days” lay ahead. “We will do everything in these talks to reach sensible agreements,” said the Bavarian before internal party talks on Wednesday morning.
One of Merkel’s priorities will be to establish an atmosphere of trust between the parties, the absence of which led to the collapse of the talks with the Greens and FDP in November.
Many within the SPD, which said it would go into opposition after the election in which its support slumped to its lowest level since 1933, fear sharing power with Merkel again will lead voters to punish it further.
To keep the rank and file on board, the SPD leadership has said it will let its members vote on Jan 21 on going ahead with detailed coalition talks after a first exploratory phase has been completed.
“I have said that (a coalition deal) must be agreed at the very latest by Easter,” said Seehofer. (Reporting by Madeline Chambers and Thorsten Severin; editing by John Stonestreet)