By Riham Alkousaa
BERLIN (Reuters) - German Chancellor Angela Merkel and her conservative Bavarian allies meet the leader of the centre-left Social Democrats (SPD) on Wednesday to start exploring the possibility of governing together.
The two groups have ruled in a 'grand coalition' for the last four years, but the SPD had vowed to go into opposition after voters rewarded it with its worst-ever post-war election result. The collapse of talks on a three-way coalition forced the SPD to re-consider in the interests of political stability.
The conservative bloc and SPD are likely to clash over healthcare, immigration, Europe, work regulations and pensions.
The SPD wants to introduce "citizen insurance," to end the differences between Germany's private and public systems which, it argues, cater for the rich and poor respectively.
The SPD wants everyone to be insured in the same way via citizen insurance.
However, conservatives, including Merkel, have rejected this, saying switching to one healthcare system would decrease market competition and lead to worse healthcare.
The SPD wants to stabilize pensions at 48 percent of the average wage by 2030, to be financed from reserves in the pension fund in the next few years. It aims to raise the contribution rate faster from 2024. The total cost of the SPD's proposal will amount to 19.2 billion euros ($22.55 billion) in 2030.
The conservatives want to first form a commission to debate what is necessary to do.
The two parties agree in broad terms on a pro-Europe agenda for Germany, but the SPD wants deeper integration than the conservatives.
SPD leader Martin Schulz has called for closer EU integration, with the aim of achieving a "United States of Europe" by 2025. This goes too far for Merkel's conservatives. [L8N1O90IU]
Last October, Merkel's Christian Democrats (CDU) agreed with her conservative Bavarian allies, the Christian Social Union (CSU), to put a number on how many people Germany would accept per year on humanitarian grounds.
The SPD rejects such a cap.
The two parties also disagree on the suspension of family reunifications for asylum seekers who were granted humanitarian protection in Germany.
The SPD is against a conservative plan to extend a suspension for reunifications which will expire in March 2018.
The two blocs are also at odds on the repatriation of Syrian refugees accused of crimes. [L1N1NZ1LI]
(Reporting By Riham Alkousaa; Editing by Richard Balmforth)