1ST LEAD Merkel, Schulz to discuss coalition, looser ties to overcome impasse By Friederike Heine, dpa

Berlin (dpa) - German Chancellor Angela Merkel and Social Democrat (SPD) leader Martin Schulz are due to conduct their first meeting on Wednesday with a goal of paving the way for coalition talks between their parties.Both Merkel‘s conservative Christian Democrats (CDU) and the SPD recorded huge losses in the September national elections, prompting the SPD to vow to go into opposition. The collapse of talks between Merkel‘s bloc and two other parties made Schulz reassess his stance.Wednesday‘s meeting is due to be attended by Merkel, Horst Seehofer - the head of her Bavarian sister party, the Christian Social Union (CSU) - and Schulz, as well as both parties‘ parliamentary group leaders.It is expected to be followed on Friday by a decision by the SPD leadership on whether to commence formal negotiations in January. Schulz has come under fire for his suggestion that, instead of repeating a grand coalition, his SPD and the CDU should form a looser alliance what would allow the centre-left party to dissent and work with the opposition on some issues."You cannot partly govern and partly be in opposition - that doesn‘t work," said Seehofer Tuesday. Some voices within the SPD were backing Schulz‘s suggestion of a looser alliance, with deputy party chief Ralf Stegner saying that voters had chosen parties, rather than coalitions, and that it was up to those parties to decide how to interact.Talks between Merkel‘s conservative CDU-CSU bloc, the environmentalist Greens and the pro-business Free Democrats (FDP) collapsed unexpectedly several weeks ago, leaving the SPD as the only viable candidate with which to achieve a majority in parliament. The CDU-CSU could also form a minority government, but Merkel has argued in favour of a stable coalition in light of far-right electoral gains in Germany and instability in the European Union.CSU veteran Edmund Stoiber told Wednesday‘s edition of mass circulation newspaper Bild that he would prefer a minority government over fresh elections.